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Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 [The following information applies to the questions displayed below.) Astro Co. sold 19,400
Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 [The following information applies to the questions displayed below.) Astro Co. sold 19,400 units of its only product and incurred a $44,828 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2018's activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $144,000. The maximum output capacity of the company is 40,000 units per year. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017 Sales $ 715, 860 Variable costs 572, 688 Contribution margin 143, 172 Fixed costs 188,000 Net loss $ (44,828) Problem 21-4A Part 1 Required: 1. Compute the break-even point in dollar sales for year 2017. (Round your answers to 2 decimal places.) Current Contribution Margin Per Unit Sales Variable costs Contribution margin Contribution Margin Ratio Choose Numerator: Contribution margin per unit 0.00 T 1 Choose Denominator: Sales per unit - = Contribution Margin Ratio Contribution margin ratio Break-Even Point in Dollar Sales: Choose Numerator: 1 Choose Denominator: Break-Even Point in Dollars Contribution margin ratio | = Break-even point in dollars Total fixed costs 1 188,0001 2. Compute the predicted break-even point in dollar sales for year 2018 assuming the machine is installed and there is no change in the unit selling price. (Round your answers to 2 decimal places.) Contribution margin per unit P roposed 0.00 Contribution Margin Ratio Choose Numerator: Choose Denominator: Contribution Margin Ratio Contribution margin ratio Break-even point in dollar sales with new machine: Choose Numerator: Choose Denominator: = Break-Even Point in Dollars Break-even point in dollars 4. Compute the sales level required in both dollars and units to earn $140,000 of target pretax income in 2018 with the machine installed and no change in unit sales price. (Do not round intermediate calculations. Round your answers to 2 decimal places. Round "Contribution margin ratio" to nearest whole percentage) Sales level required in dollars Choose Numerator: 7 Choose Denominator: = Sales dollars required = Sales dollars required Sales level required in units Choose Numerator: Choose Denominator: = Sales units required = Sales units required
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