Question
Astro Co. sold 20,500 units of its only product and Incurred a $67.750 loss (ignoring taxes) for the current year as shown here. During a
Astro Co. sold 20,500 units of its only product and Incurred a $67.750 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2016s 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 $155.000. The maximum output capacity of the company is 40.000.
Astro Company Contribution Margin Income Statement For year Ended December 31,2015. | |
Sales | $779,000 |
Variable costs | 584,250 |
Contribution Margin | 194,750 |
Fixed costs | 262,500 |
Net loss | $(67,750) |
1) Computer the break even point in dollars sa.les for year 2015.
2) Computer the predicted break even point in dollar sales for year 2016 assuming the machine is installed and is no change in the unit selling price.
3) Computer the sales level required in both dollars and units to earn $250,000 of target pretax income in 2016 with the machine installed and no change in unit sales price.
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