Required informationProblem 5-3A (Static) Break-even analysis; income targeting and strategy LO C2, A1, P2Skip to question

[The following information applies to the questions displayed below.] Astro Company sold 20,000 units of its only product and reported income of $25,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $241,000. The selling price per unit will not change.

ASTRO COMPANY
Contribution Margin Income Statement
For Year Ended December 31
Sales ($50 per unit)	$ 1,000,000
Variable costs ($40 per unit)	800,000
Contribution margin	200,000
Fixed costs	175,000
Income	$ 25,000

Required Information Problem 5-3A (Static) Break-even analysis; income targeting and strategy LO C2, A1, P2 [The following information applies to the questions displayed below] Astro Company sold 20.000 units of its only product and reported income of $25,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings. the company must increase its annual fixed costs by $241,000. The selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) $ 1,090, 290 Variable costs ($40 per unit) 800, ege Contribution margin 280, 808 Fixed costs 175, 20e Income $ 25, 20e Problem 5-3A (Static) Part 1 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. Contribution Margin Per Unit Proposed 0 Contribution Margin Ratio Numerator: Denominator: = Contribution Margin Ratio = Contribution margin ratio Break-Even Point in Dollar Sales with New Machine: Numerator: 1 Denominator: Break-Even Point in Dollars = Break-even point in dollarsRequired Information Problem 5-3A (Static) Break-even analysis; income targeting and strategy LO C2, A1, P2 [The following information applies to the questions displayed below.] Astro Company sold 20.000 units of its only product and reported income of $25,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $241,000. The selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) $ 1,090, 209 Variable costs ($40 per unit) 890, 298 Contribution margin 280, 809 Fixed costs 175, 208 Income $ 25, 090 Problem 5-3A (Static) Part 2 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,000,000. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Contribution margin $Required Information Problem 5-3A (Static) Break-even analysis; income targeting and strategy LO C2, A1, P2 [The following information applies to the questions displayed below] Astro Company sold 20,000 units of its only product and reported income of $25,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $241,000. The selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) $ 1, 090, 290 Variable costs ($40 per unit) 280, 208 Contribution margin 280, 208 Fixed costs 175, 090 Income $ 25, 090 Problem 5-3A (Static) Part 3 3. Compute the sales level required in both dollars and units to earn $208,000 of target income for next year with the machine installed. Sales level required in dollars Numerator: Denominator: Sales dollars required Sales level required in units Numerator: Denominator: = Sales units required