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Frieden Company's contribution format income statement for the most recent month is given below: Sales (43,000 units) Variable expenses Contribution margin Fixed expenses ed
Frieden Company's contribution format income statement for the most recent month is given below: Sales (43,000 units) Variable expenses Contribution margin Fixed expenses ed Net operating income $1,204,000 842,800 361,200 288,960 $ 72,240 The industry in which Frieden Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $8.40 per unit. However, fixed expenses would increase to a total of $650,160 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. (Input all amounts as positive values except losses which should be indicated by minus sign. Round your "Per unit" answers to 2 decimal places.) Amount Sales $ Variable expenses Present Per Unit 1,204,000 $ 28.00 842,800 Percentage 100 % $ 19.60 70 % Contribution margin 361,200 $ 8.40 30 % Amount 1,204,000 481,600 722,400 Proposed Per Unit $ 28.00 11.20 Percentage 100 40 % % $ 16.80 60 % Fixed expenses 288,960 650,160 Net operating income (loss) $ 72,240 $ 72,240 Total points
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