Rundle Company currently produces and sells 7,800 units annually of a product that has a variable cost of $16 per unit and annual fixed costs of $316,600. The company currently earns a $89,000 annual profit. Assume that Rundle has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $14 per unit. The investment would cause fixed costs to increase by $10,700 because of additional depreciation cost.

Required

Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).

Prepare a contribution margin income statement, assuming that Rundle invests in the new production equipment.

A. Sales Price : _______

B.

RUNDLE COMPANY
Contribution margin Income statement