Answer:
Carey Company
a) Projected CVP Income Statement for 2020 (without changes):
Sales $1,658,800
Variable costs 1,148,400
Contribution $510,400
Fixed Costs 467,000
Profit $43,400
b) Projected CVP Income Statement for 2020 (with changes)
Sales $1,621,158
Variable costs 964,656
Contribution $656,502
Fixed Costs 561,000
Profit $95,502
Step-by-step explanation:
a) Sales units will increase from 63,800 to 66,990 (63,800 x 1.05)
b) Old selling price = $1,658,800/63,800 = $26 per unit
c) New selling price = $26.00 - $1.80 = $24.20 per unit
d) Old variable cost per unit = $1,148,400/63,800 = $18
e) New variable cost per unit = $18 - 3.60 = $14.40
f) Sales Value = $24.20 x 66,990 = $1,621,158
g) Variable costs = $14.40 x 66,990 = $964,656
h) New fixed cost = $467,000 + 94,000 = $561,000
i) A CVP Income Statement is a Cost Volume Profit income statement whereby the costs are identified according to their cost behaviors of whether they are fixed or variable or semi-fixed.