Yeltsin Company had sales in 2012 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.
Prepare a CVP income statement for 2012, assuming the changes are made as described.