Answered step by step
Verified Expert Solution
Question
1 Approved Answer
! Required information Problem 21-3A (Algo) Break-even analysis; income targeting and strategy LO C2, A1, P2 [The following information applies to the questions displayed
! Required information Problem 21-3A (Algo) Break-even analysis; income targeting and strategy LO C2, A1, P2 [The following information applies to the questions displayed below.] Astro Company sold 21,000 units of its only product and reported income of $84,800 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 48% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $152,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($52 per unit) Variable costs ($44 per unit) Contribution margin Fixed costs Income $ 1,092,000 924,000 168,000 83,200 $ 84,800 Problem 21-3A (Algo) Part 1 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. Note: Round your answers to 2 decimal places. 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. Note: Round your answers to 2 decimal places. Contribution margin Contribution Margin Ratio Numerator: $ Denominator: Break-even point in dollar sales with new machine: Numerator: Total fixed costs $ 1.00 Per unit Contribution Margin Ratio = Contribution margin ratio 0 Denominator: Break-Even Point in Dollars Contribution margin ratio Break-even point in dollars 235,200/ 0.56% = $ 42,000,000
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