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Astro Company sold 25,500 units of its only product and reported income of $277,200 for the current year. During a planning session for next year's
Astro Company sold 25,500 units of its only product and reported income of $277,200 for the current year. During a planning session for next year's 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 $148,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) $ 1,275,000 Variable costs ($32 per unit) 816,000 Contribution margin 459,000 Fixed costs 181,800 Income $ 277,200 3. Compute the sales level required in both dollars and units to earn $180,000 of target income for next year with the machine installed. (Do not round intermediate calculations. Round your answers to 2 decimal places. Round "Contribution margin ratio" to nearest whole percentage) Sales level required in dollars Numerator: Fixed costs plus target income Denominator: Il I Contribution margin ratio = II Sales dollars required 0 Sales level required in units Numerator: Denominator: = Fixed costs plus target income I Contribution margin per unit = Sales units required 0
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