E6.5 (LO 1), AP Carey Company had sales in 2021 of $1,500,000 on 60,000 units. Variable costs totaled $900,000, and fixed costs totaled $500,000. A new raw material is available that will decrease the unit variable costs by 20% (or $3). However, to process the new raw material, fixed operating costs will increase by $100,000. Management feels that one-half of the decline in the unit variable costs 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 5% increase in the number of units sold. Instructions Prepare a projected CVP income statement for 2022 (a) assuming the changes have not been made, and (b) assuming that changes are made as described. Compute break-even point in sales units for a company with more than one product.
E6.5 (LO 1), AP Carey Company had sales in 2021 of $1,500,000 on 60,000 units. Variable costs totaled $900,000, and fixed costs totaled $500,000.
A new raw material is available that will decrease the unit variable costs by 20% (or $3). However, to process the new raw material, fixed operating costs will increase by $100,000. Management feels that one-half of the decline in the unit variable costs 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 5% increase in the number of units sold.
Instructions
Prepare a
Compute break-even point in sales units for a company with more than one product.
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