Question
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]
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 23,000 units of its only product and reported income of $264,600 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 44% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $156,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($56 per unit) Variable costs ($35 per unit) Contribution margin Fixed costs Income $ 1,288,000 805,000 483,000 218,400 $ 264,600 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. Contribution margin Contribution Margin Ratio Numerator: Denominator: Break-even point in dollar sales with new machine: Numerator: Per unit Contribution Margin Ratio Contribution margin ratio Denominator: Break-Even Point in Dollars Break-even point in dollars ces Astro Company sold 23,000 units of its only product and reported income of $264,600 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 44% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $156,000. Total units sold and the selling price per unit will not change ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($56 per unit) Variable costs ($35 per unit) Contribution margin Fixed costs Income $ 1,288,000 805,000 483,000 215,400 $264,600 Problem 21-3A (Algo) Part 2 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,288,000. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Contribution margin 3. Compute the sales level required in both dollars and units to earn $260,000 of target income for next year with the machine installed. Note: 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 Numerator: Denominator: Sales dollars required Sales level required in units Numerator: Denominator: Sales units required
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