Belmont Company currently produces and sells 7,0000 units annually of a product that has a variable cost of $19 per unit and annual fixed costs of $175,000. The company currently earns an $84,000 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 $15 per unit. The investment would case fixed costs to increase by $14,000 because of additional depreciation cost.

A. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).

B. Prepare a contribution margin income statement, assuming that Belmont invests in the new production equipment. Recommend where Belmont should incest in the new equipment.