Solution: Please place your answer and supporting calculations in the space below and either highlight your final answer or surround it with a border so that it can be easily identified by the grader. 1 Break-Even Point in Dollar Sales for 2020: Problem A (20 points): Fox Inc. sold 21,000 units of its only product and incurred a $81,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2021's activities, the productions 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 $150,000. The maximum output capacity of the company is 40,000 units per year. 2 Predicted Break-Even Point in Dollar Sales for 2021: Turtle Company Contribution Margin Income Statement For the Year Ending December 31, 2020 Sales Variable Costs Contribution Margin Fixed Costs Pre-Tax Loss $1,596,000 1,276,800 319,200 400,200 $ (81,000) 3 Forcasted Contribution Margin Income Statement for 2021: 4 Sales level required in Dollars for 2021 to earn target pretax income of $540,000: Required: 1 Compute the break-even point in dollar sales for year 2020. (2 points) 2 Compute the predicted break-even point in dollar sales for year 2021 assuming machine is installed and no change occurs in the unit selling price. (Round all numbers to the nearest dollar.) (3 points) 3 Prepare a forecasted contribution margin income statement for 2021 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. (5 points) 4 Compute the sales level required in both dollars and units to earn $540,000 of target pretax income in 2021 with the machine installed and no change in unit sales price. (Round all numbers to the nearest dollar and to whole units.) (5 points) 5 Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume no income taxes will be due. (5 points) Sales level required in Units for 2021 to earn target pretax income of $540,000: Check Figures: Item 3: Pre-Tax Income = $407,400; Item 5: Contribution Margin = $1,090,200 5 Forecasted Contribution Margin Income Statement at Sales Level computed in Item 4