Option #1: Analyzing Cost Behavior

Blue Company sold 30,000 units of its only product and incurred a $85,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2020s activities, the production manager notes that variable costs can be reduced 25% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $175,000. The maximum output capacity of the company is 55,000 units per year.

Blue Company

Contribution Margin Income Statement

For Year Ending December 31, 2019

Sales	$900,000
Variable	$680,000
Contribution Margin	$220,000
Fixed Cost	$305,000
Net Loss	$(85,000)

1. Compute the break-even point in dollar sales for year 2019. (Round your answers to 2 decimal places.)

2. Compute the predicted break-even point in dollar sales for year 2020 assuming the machine is installed and there is no change in the unit selling price. (Round your answers to 2 decimal places.)

3. You are the management account for the organization and must present your analysis of the calculations above to upper management in a PowerPoint presentation.

Complete Items 1 and 2 above in an Excel spreadsheet using the answer template linked here. Be sure to select the correct option using the appropriate tab at the base of the spreadsheet. Make sure that you show your work (i.e., calculations).