Frieden Company's contribution format income statement for last month is shown below: Sales (30,000 units) Variable expenses Contribution margin Fixed expenses Operating income $1,200,000 720,000 480,000 384,000 $ 96,000 Competition is intense, and Frieden Company's profits vary considerably from one year to the next. Management is exploring opportunities to increase profitability. Required: 1. Frieden's management is considering a major upgrade to the manufacturing equipment, which would result in fixed expenses increasing by $480,000 per month. However, variable expenses would decrease by $16 per unit. Selling price would not change. Prepare two contribution format income statements, one showing current operations and one showing how operations would appear if the upgrade is completed. Show an Amount column, a Per Unit column, and a Percentage column on each statement.
Frieden Company's contribution format income statement for last month is shown below: Sales (30,000 units) Variable expenses Contribution margin Fixed expenses Operating income $1,200,000 720,000 480,000 384,000 $ 96,000 Competition is intense, and Frieden Company's profits vary considerably from one year to the next. Management is exploring opportunities to increase profitability. Required: 1. Frieden's management is considering a major upgrade to the manufacturing equipment, which would result in fixed expenses increasing by $480,000 per month. However, variable expenses would decrease by $16 per unit. Selling price would not change. Prepare two contribution format income statements, one showing current operations and one showing how operations would appear if the upgrade is completed. Show an Amount column, a Per Unit column, and a Percentage column on each statement.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Frieden Company's contribution format income statement for last month is shown below:
Sales (30,000 units)
Variable expenses
Contribution margin
Fixed expenses
Operating income
$1,200,000
720,000
480,000
384,000
$ 96,000
Competition is intense, and Frieden Company's profits vary considerably from one year to the next. Management is exploring
opportunities to increase profitability.
Required:
1. Frieden's management is considering a major upgrade to the manufacturing equipment, which would result in fixed expenses
increasing by $480,000 per month. However, variable expenses would decrease by $16 per unit. Selling price would not change.
Prepare two contribution format income statements, one showing current operations and one showing how operations would appear if
the upgrade is completed. Show an Amount column, a Per Unit column, and a Percentage column on each statement.
$
FRIEDEN COMPANY
Contribution Margin Income Statement
Present
Amount
0 $
0
Per Unit
0
%
0
$
Amount
Proposed
Per Unit
0 $
0
0
%
0
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