[The following information applies to the questions displayed below.] Astro Company sold 20,000 units of its only product and reported income of $25,000 for the current year. During a planning session for next years activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $241,000. The selling price per unit will not change.

ASTRO COMPANY
Contribution Margin Income Statement
For Year Ended December 31
Sales ($50 per unit)	$ 1,000,000
Variable costs ($40 per unit)	800,000
Contribution margin	200,000
Fixed costs	175,000
Income	$ 25,000

1. Compute the break-even point in dollar sales for next year assuming the machine is installed. 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,000,000.

1. Compute the break-even point in dollar sales for next year assuming the machine is installed. Contribution Margin Per Unit Proposed Sales 50 Per unit Variable costs 32 Per unit Contribution margin $ 18 Per unit Contribution Margin Ratio Numerator: Contribution margin per unit II 1 Denominator: / Selling price per unit 10 | $ Contribution Margin Ratio Contribution margin ratio 20% 50 II = Break-Even Point in Dollar Sales with New Machine: Numerator: 1 Denominator: II Break-Even Point in Dollars Total fixed costs / Contribution margin ratio II Break-even point in dollars 1,250,000 $ 250,000 / 20% II = $ 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,000,000. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales 1,000,000 Variable costs 400,000 Contribution margin Fixed costs 600,000 450,000 150,000 Income