Astro Company sold 28,500 units of its only product and reported income of $57,900 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 $142,000. 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 ($47 per unit) Contribution margin $1,425,000 1,339,500 85,500 27,600 Income $ 57,900 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,425,000. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.) Fixed costs ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales Variable costs Contribution margin Fixed costs Income Sales level required in dollars 0 3. Compute the sales level required in both dollars and units to earn $120,000 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 units $0 Numerator: / Denominator: = 1 = Numerator: / Denominator: = 1 = Sales dollars required 0 Sales units required 0
Astro Company sold 28,500 units of its only product and reported income of $57,900 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 $142,000. 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 ($47 per unit) Contribution margin $1,425,000 1,339,500 85,500 27,600 Income $ 57,900 2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,425,000. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.) Fixed costs ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales Variable costs Contribution margin Fixed costs Income Sales level required in dollars 0 3. Compute the sales level required in both dollars and units to earn $120,000 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 units $0 Numerator: / Denominator: = 1 = Numerator: / Denominator: = 1 = Sales dollars required 0 Sales units required 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Astro Company sold 28,500 units of its only product and reported income of $57,900 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 $142,000. 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 ($47 per unit)
Contribution margin
Fixed costs
Income
ASTRO COMPANY
2. Prepare a contribution margin income statement for next year that shows the expected results with the machine
installed. Assume sales are $1,425,000. (Do not round intermediate calculations. Round your answers to the nearest
whole dollar.)
Variable costs
Contribution Margin Income Statement
For Year Ended December 31
Sales
Contribution margin
Fixed costs
Income
$ 1,425,000
1,339,500
85,500
27,600
$ 57,900
Sales level required in dollars
Sales level required in units
0
3. Compute the sales level required in both dollars and units to earn $120,000 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)
$0
Numerator: Denominator: =
1
= Sales dollars required
Numerator: / Denominator: =
1
=
0
Sales units required
0
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