Chapter 20 Practice Problem \#2 Happiness Corporation sold 120,000 units of its only product and incurred a $1,380,000 loss (ignoring taxes) for the current year as shown below. During a planning session for 2023's activities, the production manger notes that total variable costs can be reduced by 52% if a new machine is installed that automates several operations. No changes will be made to the number of units produced and sold. However, to obtain these savings, the company must increase its annual fixed costs by $2,325,000. The maximum output capacity of the company is 175,000 units per year. Directions: Use the formulas in the chapter to calculate the following items (to receive full credit, show all calculations using words and numbers). Rounding: Production Units should be rounded to whole units (i.e. 72,456.95 units =72,457 units). 1. Calculate the breakeven point in dollar and units for year 2022. To avoid rounding errors, the contribution margin ratio should be rounded to four decimal places (i.e. 18.1234% ). Answers must include the formula using words and numbers. 2. Calculate the predicted breakeven point in dollar sales for year 2023 assuming the machine is installed and no change occurs in the unit sales price. Include the breakeven units and dollars. To avoid rounding errors, the contribution margin ratio should be rounded to four decimal places (i.e. 18.1234\%). Answers must include the formula using words and numbers. 3. Prepare a forecasted contribution margin income statement for 2023 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold will not change. The statement should include number of units sold, sales price per unit, and variable costs per unit. Answers must include the formula using words and numbers. 4. Compute the sales level required in both dollars and units to earn a target profit of $2,133,000 in 2023 with the machine installed. Answers must include the formula using words and numbers