Required information Problem 5-3A (Static) Break-even analysis; income targeting and strategy LO C2, A1, P2 [The following information applies to the questions displayed below.] Astro Company sold 20,000 units of its only product and reported income of $25,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $241,000. The selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) $ 1,000,000 Variable costs ($40 per unit) 800,000 Contribution margin 200,000 Fixed costs 175,000 Income $ 25,000 3. Compute the sales level required in both dollars and units to earn $208,000 of target income for next year with the machine installed. Sales level required in dollars Numerator: Denominator: 24 Sales dollars required Sales Contribution margin Denominator: Fixed costs Sales units required Fixed costs minus target income Fixed costs plus target income ...... Fixed costs minus target income Fixed costs plus target income Income Sales Variable cost