Astro Co. sold 22,000 units of its only product and incurred a $100,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2014s 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 $170,000. The maximum output capacity of the company is 40,000 units per year.

ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2013
Sales		$	1,100,000
Variable costs			880,000
Contribution margin			220,000
Fixed costs			320,000
Net loss		$	(100,000	)

rev: 08_05_2013_QC_32982, 12_10_2013_QC_42101, 05_19_2014_QC_49611, 10_15_2014_QC_56163, 11_13_2014_QC_59206, 09_08_2015_QC_CS-21959, 10_16_2015_QC_CS-28071, 10_22_2015_QC_CS-28071, 11_14_2015_QC_CS-32985, 11_14_2015_QC_CS-32969, 11_18_2015_QC_CS-32908

References

Section BreakProblem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1

37.

value: 3.00 points

Required information

Problem 21-4A Part 1

Required:
1.	Compute the break-even point in dollar sales for year 2013. (Round variable costs to two decimal places.)

rev: 11_13_2014_QC_59206

References

eBook & Resources

Expanded tableDifficulty: HardLearning Objective: 21-C2 Describe several applications of costvolume- profit analysis.

Problem 21-4A Part 1Learning Objective: 21-A1 Compute the contribution margin and describe what it reveals about a companys cost structure.Learning Objective: 21-P2 Compute the break-even point for a single product company.

38.

value: 3.00 points

Required information

Problem 21-4A Part 2

2.	Compute the predicted break-even point in dollar sales for year 2014 assuming the machine is installed and there is no change in the unit sales price.

rev: 10_15_2014_QC_56163, 10_18_2014_QC_56163

References

eBook & Resources

Expanded tableDifficulty: HardLearning Objective: 21-C2 Describe several applications of costvolume- profit analysis.

Problem 21-4A Part 2Learning Objective: 21-A1 Compute the contribution margin and describe what it reveals about a companys cost structure.Learning Objective: 21-P2 Compute the break-even point for a single product company.

39.

value: 3.00 points

Required information

Problem 21-4A Part 3

3.	Prepare a forecasted contribution margin income statement for 2014 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold will not change, and no income taxes will be due.

rev: 05_15_2014_QC_49611

References

eBook & Resources

Expanded tableDifficulty: HardLearning Objective: 21-C2 Describe several applications of costvolume- profit analysis.

Problem 21-4A Part 3Learning Objective: 21-A1 Compute the contribution margin and describe what it reveals about a companys cost structure.Learning Objective: 21-P2 Compute the break-even point for a single product company.

40.

value: 3.00 points

Required information

Problem 21-4A Part 4

4.	Compute the sales level required in both dollars and units to earn $161,000 of after-tax income in 2014 with the machine installed and no change in the unit sales price. Assume that the income tax rate is 30%.

rev: 07_24_2013_QC_32982, 08_05_2013_QC_32982, 12_10_2013_QC_42101, 12_17_2014_QC_CS-1505

References

eBook & Resources

Expanded tableDifficulty: HardLearning Objective: 21-C2 Describe several applications of costvolume- profit analysis.

Problem 21-4A Part 4Learning Objective: 21-A1 Compute the contribution margin and describe what it reveals about a companys cost structure.Learning Objective: 21-P2 Compute the break-even point for a single product company.

41.

value: 3.00 points

Required information

Problem 21-4A Part 5

5.	Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume an income tax rate of 30%.