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) Variable costs ($32 per unit) Contribution margin Fixed costs Income $ 1,275,000 816,000 459,000 181,800 $ 277,200
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) Variable costs ($32 per unit) Contribution margin Fixed costs Income $ 1,275,000 816,000 459,000 181,800 $ 277,200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
Sales level required in units
Numerator:
Fixed costs plus target income
Denominator:
/Contribution margin ratio
Denominator:
/Contribution margin per unit
=
= Sales dollars required
=
0
= Sales units required
0
Transcribed Image Text: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)
Variable costs ($32 per unit)
Contribution margin
Fixed costs
Income
$ 1,275,000
816,000
459,000
181,800
$ 277,200
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