Assumptions:
Reduction in variable costs possible through automation	50.0%
Increased fixed costs through automation	$ 150,000
Maximum output capacity through automation	40,000	units
Current state:
Rivers Co.
Contribution Margin Income Statement
for the Year Ended December 31, 2019
Sales	$ 750,000
Variable costs	600,000
Contribution margin	150,000
Fixed costs	200,000
Net Loss	$ 50,000
General Instructions: Make sure that you have good fomatting and you link to the assumptions in your calculations.
You will need to insert lines to make the calculations for each part. Please do so in the space provided.
Assignment: (Five parts)
Part 1: Compute the break-even point in dollar sales for 2019.
Part 2: Compute the predicted break-even point in dollar sales for 2020 assuming the machine is installed and
no change occurs in the unit selling price. (Round the change in variable costs to a whole number.)
Part 3: Prepare a forecasted contribution margin income statement for 2020 that shows the expected results
with the machine installed. Assume that the unit selling price and the number of units sold will not
change, and no income taxes will be due.
Part 4: Compute the sales level required in both dollars and and units to earn $200,000 of target pretax income in
2020 with the machine installed and no change in unit sales price. (Round answers to whole dollars and whole units.)
Part 5: Prepare a forecasted contribution margin income statement that shows the results at the sales level
computed in part 4. Assume no income taxes will be due.