Stuart Company currently produces and sells 8,300 units annually of a product that has a variable cost of $14 per unit and annual fixed costs of $342,000. The company currently earns a $73,000 annual profit. Assume that Stuart has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $12 per unit. The investment would cause fixed costs to increase by $9,400 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 Stuart invests in the new production equipment.