Astro Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year, as shown here. During a planning session for year 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. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2019 Sales $1,000,000 Variable costs 800,000 Contribution margin 200,000 Fixed costs 250,000 Net loss $ (50,000) Required: 1. Compute the break-even point in dollar sales for 2019. Contribution Margin Per Unit Current Year $ 0 Contribution Margin Ratio Choose Numerator: Choose Denominator: Contribution Margin Ratio Contribution margin ratio Break-Even Point in Dollar Sales: Choose Numerator: Choose Denominator: Break-Even Point in Dollars Break-even point in dollars 0 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. Contribution Margin Per Unit Proposed S 0 Contribution Margin Ratio Choose Numerator: 1 Choose Denominator: 1 Contribution Margin Ratio Contribution margin ratio 0 Break-Even Point in Dollar Sales with New Machine: Choose Numerator: / Choose Denominator: Break-Even Point in Dollars Break-even point in dollars 0 3. Prepare a forecasted contribution margin income statement for 2020 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due. ASTRO COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2020 Contribution margin 4. 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 change in unit sales price. Sales level required in dollars Choose Numerator: Choose Denominator: Sales Dollars Required Sales dollars required Sales level required in units Choose Numerator: Choose Denominator: Sales Units Required Sales units required / 5. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assumen income taxes will be due. (Round your intermediate calculation and final answers to the nearest whole dollar.) ASTRO COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2020 $ Per Unit $ $ 50 Contribution margin
