Problem 21-3B Break-even analysis; income targeting and strategy C2 A1 P2 Rivera Co. sold 20,000 units of its only product and reported income of $20,000 for the current year. During a planning session for next year's 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 $113,000. The selling price will not change. Contribution Margin Income Statement For Year Ended December 31 O Sales (20,000 x $37.50 per unit) . . . . . . . . . . . $750,000 Variable costs (20,000 * $30 per unit) . . . .. .. 600,000 Contribution margin . . .... 150,000 Fixed costs . ... 130,000 Income. . . . . $ 20,000 Required 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $750,000. 3. Compute the sales level required in both dollars and units to earn $87,000 of target income for next year with the machine installed. Check (2) Income, $57,000