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Belmont Company currently produces and sells 7, 800 units annually of a product that has a variable cost of exist17 per unit and annual fixed
Belmont Company currently produces and sells 7, 800 units annually of a product that has a variable cost of exist17 per unit and annual fixed costs of exist304,000. The company currently earns a exist86,000 annual profit. Assume that Belmont has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to exist15 per unit. The investment would cause fixed costs to increase by exist10,000 because of additional depreciation cost. Required: a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b-1. Prepare a contribution margin income statement, assuming that Belmont invests in the new production equipment. b-2. Recommend whether Belmont should invest in the new equipment. Should invest in the new equipment Should not invest in the new equipment
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