Exercise 5-18 Sensitivity analysis

page 202 Managerial Accounting Fifth Edition John Wild . Ken Shaw

Exercise 5-16

Hudson Co. reports the contribution margin income statement for2015 below. Using this information compute Hudson Co.

Contribution Margins Income Statement

For year Ended December 31, 2015

Sales (9,600 units at $225 each) $2,160,000

Variable costs (9,600 units at $180 each) $1,728,000

Contribution margin $432,000

Fixed Cost 324,000

Pretax Income $108,000

Refer to the information in Exercise 5-16 . Assume the company is considering investing in a new machine that will increase its fixed cost by $40,500 per year and decrease its variable costs of $9 per unit . Prepare a forcasted contribution margin income statement for 2016 assuming the company purchase this machine.