Astro Co. sold 20,000 units of its only product and incurred a $50,000 loss(ignoring taxes) for the current year, as shown below. During the planning session for 2020's 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 $200,000. The maximum output capacity of the company is 40,000 units per year.

1) Compute the break-even point in dollar sales for 2019.

2) Compute the predicted break-even point in dollar sales for 2020 assuming the machine is installed and there is no change in the unit selling price or units sold from 2019.

3) Prepare a forecasted contribution margin income statement for 2020 that shows the expected results with the machining installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due.

Units per year 3 Contribution Margin Income Statement 4 For Year Ended December 31, 2019 5 Sales 1,000,000 6 Variable Costs 800,000 7 Contribution Margin 200,000 8 Fixed Costs 250.000 9 Net Loss (50,000) 10 11 REQUIRED: 12 13 1 Compute the break-even point in dollar sales for 2019, 14 Per Unit: Fixed Costs 16 Selling Price 17 Contribution Margin per Unit Variable Costs 16 Contribution Marin 19 1,250,000 Compute the predicted break-even point in dollar sales for 2020 assuming the machine is installed and there is no change in the unit selling price or units sola 2. 2013. HINT: Remember to adjust variable costs and fixed costs for the installation of the machine. 20 21 22 2 Per Unit Selling Price Variable Costa Contribution Margin Fixed Costs Contribution Martin per Unit 20 26 27 28 29 30 31 32 33 34 35 Prepare a forecasted contribution margin income statement for 2020 that shows the expected results with the maching installed. Assume that 3 and the number of units sold will not change, and no income taxes will be due. Contribution Margin Income Statement For Year Ended December 31, 2020 Sales Variable Costs Contribution Margin Fixed Costs Net Loss 37 35 Compute the sales level required in both dollars and units to earn $200,000 of target pretax income in 2020 with the machine installed and no cha 4 price Fixed Costs +Target Income units Selling Price per Unit Contribution Margin per Unit 40 X 5 Prepare a forecasted contribution margin income statement that shows the result at the sales level computed in part 4. Assume no income taxes will 41 Contribution Margin Income Statement For Year Ended December 31, 2020 Sales Variable costs Contribution Margin Fixed Costs Netlost 50 CVP