answer due by 11pm eastern standard time USA

Exercise 3-13A Evaluating simultaneous changes in fixed and variable costs LO 3-5

Belmont Company currently produces and sells 7,000 units annually of a product that has a variable cost of $19 per unit and annual fixed costs of $175,000. The company currently earns a $84,000 annual profit. Assume that Belmont has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $15 per unit. The investment would cause fixed costs to increase by $14,000 because of additional depreciation cost.

Required:

a.	Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).

b-1.	Prepare a contribution margin income statement, assuming that Belmont invests in the new production equipment.

b-2.	Recommend whether Belmont should invest in the new equipment.
	Should invest in the new equipment Should not invest in the new equipment