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10 February, 13:01

Carey Company had sales in 2019 of $1,923,000 on 64,100 units. Variable costs totaled $897,400, and fixed costs totaled $502,000. 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 $98,000. 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 5% increase in the number of units sold. (a) Prepare a projected CVP income statement for 2020, assuming the changes have not been made.

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  1. 10 February, 13:30
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    a) CVP Income Statement Total per unit

    Sales $1,923,000 $30

    Variable costs - $897,400 - $14

    Contribution $1,025,600 $16

    Fixed Costs - $502,000

    Net Income $523,600
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