Rooney Company currently produces and sells $6,800$ units annually of a

product that has a variable cost of $$10$ per unit and annual fixed costs of

$$310,400.$ The company currently earns a $$84,000$ annual profit. Assume

that Rooney has the opportunity to invest in new labor$-$saving production

equipment that will enable the company to reduce variable costs to $$8$ per

unit. The investment would cause fixed costs to increase by $$10,500$

because of additional depreciation cost.

Required

a$.$ Use the equation method to determine the sales price per unit under

existing conditions $($current equipment is used$).$

b$.$ Prepare a contribution margin income statement, assuming that Rooney

invests in the new production equipment.Rooney Company currently produces and sells $6,800$ units annually of a

product that has a variable cost of $$10$ per unit and annual fixed costs of

$$310,400.$ The company currently earns a $$84,000$ annual profit. Assume

that Rooney has the opportunity to invest in new labor$-$saving production

equipment that will enable the company to reduce variable costs to $$8$ per

unit. The investment would cause fixed costs to increase by $$10,500$

because of additional depreciation cost.

Required

a$.$ Use the equation method to determine the sales price per unit under

existing conditions $($current equipment is used$).$

b$.$ Prepare a contribution margin income statement, assuming that Rooney

invests in the new production equipment.