Question
Morton Company?s contribution format income statement for last month is given below: Sales (47,000 units ? $26 per unit) $ 1,222,000 Variable expenses 855,400 Contribution
Morton Company?s contribution format income statement for last month is given below:
Sales (47,000 units ? $26 per unit) | $ | 1,222,000 | |
Variable expenses | 855,400 | ||
Contribution margin | 366,600 | ||
Fixed expenses | 293,280 | ||
Net operating income | $ | 73,320 | |
The industry in which Morton 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 onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $7.80 per unit. However, fixed expenses would increase to a total of $659,880 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. (Round your "Per unit" answers to 2 decimal places.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started