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Austin, Inc., produces small-scale replicas of vintage automobiles for collectors and museums. Finished products are built on a 1/20 scale of originals. The firm's income
Austin, Inc., produces small-scale replicas of vintage automobiles for collectors and museums. Finished products are built on a 1/20 scale of originals. The firm's income statement showed the following: Revenues (1,590 units) Variable expenses Contribution margin Fixed expenses Operating income $801,000 471,000 $330,000 300,200 $ 29,800 An automated stamping machine has been developed that can efficiently produce body frames, hoods, and doors to the desired scale. If the machine is leased, fixed expenses will increase by $32,700 per year. The firm's production capacity will increase, which is expected to result in a 24% increase in sales volume. It is also estimated that labor costs of $27 per unit could be saved because less polishing and finishing time will be required. Required a. Calculate the firm's current contribution margin ratio and break-even point in terms of revenues. (Round your intermediate calculations to nearest whole number.) Contribution margin ratio Break-even point 411% b. Calculate the firm's contribution margin ratio and break-even point in terms of revenues if the new machine is leased. Round your intermediate calculations to nearest whole number.) Contribution margin ratio Break-even point c. Calculate the firm's operating income assuming that the new machine is leased. (Round your intermediate per unit costs to nearest whole dollar.) d. Do you believe that management of Austin, Inc., should lease the new machine? Yes No
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