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Astro Company sold 28,000 units of its only product and reported income of $161,000 for the current year. During a planning session for next year's
Astro Company sold 28,000 units of its only product and reported income of $161,000 for the current year. During a planning session for next year's 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 $143,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement Tor Year Ended December 31 Sales (556 per unit) $ 1,568,000 Variable costs (542 per unit) 1,176.000 Contribution margin 392,000 Fixed costs 231,000 Income $ 161,000 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. (Round your answers to 2 decimal places.) Per unit Contribution margin Contribution Margin Ratio Numerator: Denominator: Contribution Margin Ratio Contribution margin ratio 1 Break-even point in dollar sales with new machine: Numerator: 1 Denominator: Break-Even Point in Dollars Bruak-even point in dollars 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,568,000. (Do not round intermediate calculations. Round your answers to the nearest whole dollar) ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Contribution margin 0 $ 0 3. Compute the sales level required in both dollars and units to earn $130,000 of target income for next year with the machine installed. (Do not round intermediate calculations. Round your answers to 2 decimal places. Round "Contribution margin ratio" to nearest whole percentage) Sales level required in dollars Numerator: Denominator = Sales dollars required Sales lovel required in units Numerator: Denominator Sales units required
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