Astro Co. sold 20,000 units of its only product and reported income of $25,000 for the...

 

 

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Astro Co. 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. Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) Variable costs ($40 per unit) Contribution margin Fixed costs Income $1,000,000 800,000 200,000 175,000 $ 25,000 Required 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,000,000. Check (2) Income, $104,000 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. Astro Co. 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. Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) Variable costs ($40 per unit) Contribution margin Fixed costs Income $1,000,000 800,000 200,000 175,000 $ 25,000 Required 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,000,000. Check (2) Income, $104,000 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.

Answer rating: 100% (QA)

Selling Price 50 Vorable Cost New 40 1040 24 Contribution Fized Cost 2 Safes B EP 5024 426 17500... View the full answer