Question
Candy Company sold 55,000 units of its only product and reported income of $35,000 for the current year. Contribution Margin Income Statement For Year Ended
Candy Company sold 55,000 units of its only product and reported income of $35,000 for the current year. Contribution Margin Income Statement For Year Ended December 31 Sales ($48 per unit) $ 2,640,000 Variable costs ($40per unit) 2,200,,000 Contribution margin 440,000 Fixed costs 405,000 Income $35,000 During a planning session for the next years activities, the production manager notes that variable costs can be reduced by 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $698,000. The selling price per unit will not change. ( round your answer to the nearest whole number) Required: (a) Compute the break-even point in dollar sales for next year assuming the machine is installed. (b) Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. (c) Compute the sales level required in both dollars and units to earn $498,000 of target income for next year with the machine installed.
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