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E22-11 Polzin Company had sales in 2010 of $1,500,000 on 60,000 units.Variable costs totaled

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E22-11 Polzin Company had sales in 2010 of $1,500,000 on 60,000 units.Variable costs totaled
$840,000, and fixed costs totaled $500,000.

A new raw material is available that will decrease the variable costs per unit by 20% (or
$2.80). However, to process the new raw material, fixed operating costs will increase by $60,000.
Management feels that one-half of the decline in the variable costs per unit should be passed on
to customers in the form of a sales price reduction.The marketing department expects that this
sales price reduction will result in a 7% increase in the number of units sold.

Instructions
Prepare a CVP income statement for 2010, assuming the changes are made as described.

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