Cobb Company currently produces and sells 9,000 units annually of a product that has a variable cost of $20 per unit and annual fixed costs of $195,000. The company currently earns a $228,000 annual profit. Assume that Cobb has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $16 per unit. The investment would cause fixed costs to increase by $25,000 because of additional depreciation cost.

Required

1. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).
2. Prepare a contribution margin income statement, assuming that Cobb invests in the new production equipment.

View History Bookmarks Chapter 3 Assig X Maps ook Assignments 11,13,15,19 & 25 i Print mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com%252... erences SC Porter's Five Force... Mc Graw Hill JHome | Home Sales Variable cost Contribution margin Fixed cost Net income O Profiles ! 1 Kidd Company produces two products. Budgeted annual income statements for the two products are provided as follows. Required A Tab Window Sales F1 2 Budgeted Number 160 160 160 F2 X #3 Power Help Required a. Based on budgeted sales, determine the relative sales mix between the two products. b. Determine the weighted-average contribution margin per unit. C. Calculate the break-even point in total number of units. d. Determine the number of units of each product Kidd must sell to break even. e. Verify the break-even point by completing the following income statement. f. Determine the margin of safety based on the combined sales of the two products. FER 11 80 Power Per Unit @ $500 @ 320 @ 180 Complete this question by entering your answers in the tabs below. Required D Required C Required B F3 E Lite $ 4 Verify the break-even point by completing the following income statement. Budgeted Amount - 450 - a F4 R $80,000 (51,200) 28,800 (12,000) $16,800 Required E Total % 5 Saved 288,000 Budgeted Number 640 640 640 < Prev O L F5 T Required F 5 of 5 Lite Per Unit @ $450 @ 330 @120 F6 Y & 7 Budgeted Amount $288,000 (211, 200) 76,800 (54,000) $22,800 F7 - = Next > RECHEROPPER al ZA U 8 F8 Budgeted Number 800 800 800 9 Total M F9 b Budgeted Amount $368,000 (262,400) 105,600 (66,000) $39,600 0 F10 Help W P D Save & Exit F11 + Sun Feb Check my work F12 Submit Fini 180