Astro Co. sold 19,800 units of its only product and incurred a $48,292 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2018s activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $148,000. The maximum output capacity of the company is 40,000 units per year.

ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017
Sales		$	738,540
Variable costs			590,832
Contribution margin			147,708
Fixed costs			196,000
Net loss		$	(48,292	)

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. (Do not round intermediate calculations. Round "per unit answers" to 2 decimal places.)

Answer to question four:

Contribution Margin Income Statement for the Year December 31, 2017

	Total $	Per Unit $ (19,800 Units)
Sales	7,38,540.00	37.30
Less: Variable Costs	5,90,832.00	29.84
Contribution Margin	1,47,708.00	7.46
Less: Fixed Cost	1,96,000.00	9.90
Net Loss	-48,292.00	-2.44

For the Year 2018, due to the installation of automated machine, the Variable Cost per unit will reduce by 50%.

Therefore, the new variable cost = 0.5* $29.84 = $14.92

The new Fixed cost = $1,96,000 + $148,000 = $344,000

Contribution per Unit = Selling Price per unit Variable Cost per Unit

= $37.30 - $14.92 = $22.38

Profit Volume Ratio = Contribution per Unit / Selling Price per unit

= $22.38 / $37.30 = 0.60 or 60%

Calculation of required sales level in Dollars to earn $180,000 as per tax income in 2018

Required Sales in Dollars = (Fixed Cost + Desired Profit) / Profit Volume Ratio

= ($344,000+$180,000) / 0.6

Required Sales in Dollars = $873,333.33

Calculation of required sales level in units to earn $180,000 as per tax income in 2018

Required Sales in Units = (Fixed Cost + Desired Profit) / Contribution per Unit

= ($344,000+$180,000) / 22.38 Required Sales in Units = 23,413.76 Units

Required Information The following Information applies to the questions displayed below] Astro Co. sold 19,800 unlts of ts only product and incurred a $48292 loss (ignoring taves) for the current year as sho here. During a planning sesslon for year 2018's activitues, the production manager notes that varlable costs can be reduced 50% by Installing a machine hat automates several operations. To o tain these sa s te company must Increase its annual fixed costs by $148.000. The maximum output capacity of the company is 40,000 units per year ASTRO C Contribution Margin Incone Statement Sales Variable costs Contribution nargin Fixed costs Net loss $ 738,54e 590.832 147,788 196,880 s (48,292) 5. Prepare a forecasted contribution margin Income statement that shows the results at the sales level computed in part 4. Assur income taxes will be due. (Do not round intermediate calculations. Round "per unit answers" to 2 declmal places) ASTRO COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31.2018 S Per Unit$ S 3730 Contribution margin 20 19 e here to search