Exercise 22-15_Hall Company_CVP Analysis

Hall Company had sales in 2014 of $1,505,520 on 62,730 units. Variable costs totaled $690,030, and fixed costs totaled $638,890.

A new raw material is available that will decrease the variable costs per unit by 21% (or $2.31). However, to process the new raw material, fixed operating costs will increase by $61,710. 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.