Vernon Company currently produces and sells 6,700 units annually of a product that has a variable cost of $16 per unit and annual fixed costs of $300,200. The company currently earns a $75,000 annual profit. Assume that Vernon has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $14 per unit. The investment would cause fixed costs to increase by $10,300 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 Vernon invests in the new production equipment.

Vernon Company currently produces and selis 6,700 units annually of a product that has a variable cost of $16 per unit and annual fixed costs of $300,200. The company currently earns a $75,000 annual profit. Assume that Vernon has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $14 per unit. The irvvestment would cause fixed costs to increase by $10,300 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used): b. Prepare a contribution margin income statement, assuming that Vernon invests in the new production equipment. Complete this question by entering your answers in the tabs below. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). Vernon Company currently produces and sells 6,700 units annually of a product that has a variable cost of $16 per unit and annual flxed costs of $300,200. The company currently earns a $75.000 annual profit. Assume that Vernon has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $14 per unit. The investment would cause fixed costs to increase by $10,300 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b. Prepare a contribution margin income statement, assuming that Vernon invests in the new production equipment. Complete this question by entering your answers in the tabs below. Prepare a contribution margin income statement, assuming that Vernon invests in the new production equipment