Question
Lobster Trap Company is considering automating its manufacturing facility. Company information before and after the proposed automation follows: Before Automation After Automation Sales revenue $
Lobster Trap Company is considering automating its manufacturing facility. Company information before and after the proposed automation follows:
| Before Automation | After Automation | |||||
| Sales revenue | $ | 189,000 | $ | 189,000 | ||
| Less: Variable cost | 108,000 | 42,000 | ||||
| Contribution margin | $ | 81,000 | $ | 147,000 | ||
| Less: Fixed cost | 17,000 | 59,000 | ||||
| Net operating income | $ | 64,000 | $ | 88,000 | ||
Required:
1. Calculate Lobster Traps break-even sales dollars before and after automation.
2. Compute Lobster Traps degree of operating leverage before and after automation.
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Accounting Principles
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
9th Edition
978-0470317549, 9780470387085, 047031754X, 470387084, 978-0470533475
