[The following information applies to the questions displayed below.]

Astro Co. sold 20,800 units of its only product and incurred a $56,672 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2016s activities, the production 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 $158,000. The maximum output capacity of the company is 40,000 units per year.

ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2015 Sales Variable costs $796,640 637,312 Contribution margin Fixed costs 159,328 216,000 Net loss (56,672)