Required information 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 19,600 units of its only product and incurred a $46,568 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 $146,000. 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 $ 727,160 Variable costs 581,728 Contribution margin 145, 432 Fixed costs 192,000 Net loss $ (46, 568) Problem 21-4A Part 3 3. Prepare a forecasted contribution margin income statement for 2018 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.) ASTRO COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2018 Contribution margin Required information 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 19,600 units of its only product and incurred a $46,568 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 $146,000. 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 $ 727,160 Variable costs 581,728 Contribution margin 145, 432 Fixed costs 192,000 Net loss $ (46, 568) Problem 21-4A Part 4 4. Compute the sales level required in both dollars and units to earn $160,000 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: Choose Denominator: Sales dollars required Sales dollars required Sales level required in units Choose Numerator: Choose Denominator: = Sales units required Sales units required
