Solomon Company currently produces and sells 7,700 units annually of a product that has a variable cost of $15 per unit and annual fixed costs of $276,900. The company currently earns a $85,000 annual profit. Assume that Solomon has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $13 per unit. The investment would cause fixed costs to increase by $10,700 because of additional depreciation cost.

Required

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

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

Complete this question by entering your answers in the tabs below. Required A Required B Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). Sales price per unit Required A Required B Prepare a contribution margin income statemer SOLOMON COMPANY Contribution margin Income statement