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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: 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 $30,000 per year. The firm's production capacity will increase, which is expected to result in a 20% increase in sales volume. It is also estimated that labor costs of $28 per unit could be saved because less polishing and finishing time will be required. a. Calculate the firm's current contribution margin ratio and break-even point in terms of revenues. b. Calculate the firm's contribution margin ratio and break-even point in terms of revenues if the new machine is leased. c. Calculate the firm's operating income assuming that the new machine is leased
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