Cobb Company currently produces and sells 9,000 units annually of a product that has a variable cost of $20 per unit and annual fixed costs of $195,000. The company currently earns a $228,000 annual profit. Assume that Cobb has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $16 per unit. The investment would cause fixed costs to increase by $25,000 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b. Prepare a contribution margin income statement, assuming that Cobb invests in the new production equipment. Complete this question by entering your answers in the tabs below. Required A Required B Prepare a contribution margin income statement, assuming that Cobb invests in the new production equipment. COBB COMPANY Contribution margin Income Statement Sales Variable costs Contribution margin Fixed costs Net income Answer is complete but not entirely correct. ✓$ 603,000✔ ✓ (144,000) ✓$ 459,000✔ ›› ✓$ 220,000 x 239,000✔ < Required A Required B >
Cobb Company currently produces and sells 9,000 units annually of a product that has a variable cost of $20 per unit and annual fixed costs of $195,000. The company currently earns a $228,000 annual profit. Assume that Cobb has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $16 per unit. The investment would cause fixed costs to increase by $25,000 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b. Prepare a contribution margin income statement, assuming that Cobb invests in the new production equipment. Complete this question by entering your answers in the tabs below. Required A Required B Prepare a contribution margin income statement, assuming that Cobb invests in the new production equipment. COBB COMPANY Contribution margin Income Statement Sales Variable costs Contribution margin Fixed costs Net income Answer is complete but not entirely correct. ✓$ 603,000✔ ✓ (144,000) ✓$ 459,000✔ ›› ✓$ 220,000 x 239,000✔ < Required A Required B >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cobb Company currently produces and sells 9,000 units annually of a product that has a variable cost of $20 per unit and annual fixed
costs of $195,000. The company currently earns a $228,000 annual profit. Assume that Cobb has the opportunity to invest in new
labor-saving production equipment that will enable the company to reduce variable costs to $16 per unit. The investment would cause
fixed costs to increase by $25,000 because of additional depreciation cost.
Required
a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).
b. Prepare a contribution margin income statement, assuming that Cobb invests in the new production equipment.
Complete this question by entering your answers in the tabs below.
Required A Required B
Prepare a contribution margin income statement, assuming that Cobb invests in the new production equipment.
COBB COMPANY
Contribution margin Income Statement
Sales
Variable costs
Contribution margin
Fixed costs
Net income
Answer is complete but not entirely correct.
✓$ 603,000✔
✓ (144,000)
✓$ 459,000✔
››
✓$
220,000 x
239,000✔
< Required A
Required B >
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