Question
Benson Company currently produces and sells 7,600 units annually of a product that has a variable cost of $14 per unit and annual fixed costs
Benson Company currently produces and sells 7,600 units annually of a product that has a variable cost of $14 per unit and annual fixed costs of $300,400. The company currently earns a $72,000 annual profit. Assume that Benson has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $12 per unit. The investment would cause fixed costs to increase by $10,700 because of additional depreciation cost.
Required
Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).
create a contribution margin income statement, assuming that Benson invests in the new production equipment.
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