Assume the company is considering investing in a new machine that will increase its fixed costs by $45,500 per year and decrease its variable costs by $10 per unit. Prepare a forecasted contribution margin income statement for 2020 assuming the company purchases this machine.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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### Required Information

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

Hudson Co. reports the contribution margin income statement for 2019.

#### HUDSON CO.
Contribution Margin Income Statement  
For Year Ended December 31, 2019

- **Sales (10,600 units at $300 each):** $3,180,000  
- **Variable costs (10,600 units at $240 each):** $2,544,000  
- **Contribution margin:** $636,000  
- **Fixed costs:** $480,000  
- **Pretax income:** $156,000  

---

Assume the company is considering investing in a new machine that will increase its fixed costs by $45,500 per year and decrease its variable costs by $10 per unit. Prepare a forecasted contribution margin income statement for 2020 assuming the company purchases this machine.

#### HUDSON CO.
Forecasted Contribution Margin Income Statement  
For Year Ended December 31, 2020

- **Sales:** [Blank]  
- **Variable costs:** [Blank]  
- **Contribution margin:** $0  
- **Fixed costs:** [Blank]  
- **Income (pretax)/Loss:** $0  

**Should the company purchase the machine?**
Transcribed Image Text:### Required Information [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2019. #### HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 - **Sales (10,600 units at $300 each):** $3,180,000 - **Variable costs (10,600 units at $240 each):** $2,544,000 - **Contribution margin:** $636,000 - **Fixed costs:** $480,000 - **Pretax income:** $156,000 --- Assume the company is considering investing in a new machine that will increase its fixed costs by $45,500 per year and decrease its variable costs by $10 per unit. Prepare a forecasted contribution margin income statement for 2020 assuming the company purchases this machine. #### HUDSON CO. Forecasted Contribution Margin Income Statement For Year Ended December 31, 2020 - **Sales:** [Blank] - **Variable costs:** [Blank] - **Contribution margin:** $0 - **Fixed costs:** [Blank] - **Income (pretax)/Loss:** $0 **Should the company purchase the machine?**
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