Monsoon Rain Inc. had sales in 2021 of $1,560,000 on 60,000 units. Variable costs totaled...
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Monsoon Rain Inc. had sales in 2021 of $1,560,000 on 60,000 units. Variable costs totaled $720,000, and fixed costs totaled $500,000. The company will be using a new raw material in 2022 that will decrease the variable costs per unit by 25% (or $3.00). However, to process the new raw material, fixed operating costs will increase by $150,000. 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. Prepare a projected income statement (contribution format) for 2022. [3 marks]
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