Astro Co. sold 20,700 units of its only product and incurred a $83,778 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 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $157,000. The maximum output capacity of the company is 40,000 units per year.

ASTRO COMPANY

Contribution Margin Income Statement

For Year Ended December 31, 2015 Sales $ 790,740 Variable costs 553,518 Contribution margin 237,222 Fixed costs 321,000 Net loss $ (83,778 )