Problem 30.3A Choosing relevant data, determining contribution margin of a segmer King Company makes a single product that it sells to retall stores. The firm's finishing department uses hand labor to perform Its work on all products. A proposal has been made by the company's vice president to acquire machinery that will perform most of the functions of this department. The finishing department has consistently produced 49,000 units a year, and that is the estimated production for the foreseeable future. A summary of the manufacturing costs of the department follows: Direct materials Direct labor Manufacturing overhead: $ 122,500 918,750 Varlable costs Flxed costs 183,750 122,500 The machinery being considered will cost $795,000 and have an estimated useful life of 5 years, with no salvage value. The machinery will cause the following changes in costs: a. Direct labor will decrease by $8.90 per unit b. Direct materials will not change c. Variable manufacturing overhead will decrease by S 1.70 per unit. d. Fixed manufacturing overhead will Increase by $49,000 per year. 1. Prepare an analysis showing the effect on net income of purchasing the equipment. (Round your "per unlit answers to 2 decimal places) Decreases in per unit variable costs Direct labor S 8.90 1.70 Variable manfacturing overhead Decreases in per unit variable costs10.60 Total decrease in variable costs S 10.60 Increases in fixed costs Fixed manfacturing overhead 49,000 Total increase in fixed costs 49,000 Net decrease in costs Analyze: Assume that the use of the new machinery will increase the number of imperfect products produced by 3 percent of total production. These imperfect must be reprocessed at a cost of $10 per unit, increasing variable manufacturing costs What net annual increase or decrease in costs can be projectod? Net decrease in costs