Rivera Co. sold 20,000 units of its only product and reported income of $20,000 for the current year. During a planning session for next year's activities, theproduction manager notes that variable costs can be reduced 25% by installing a machine that automates several operations. To obtain these savings, the companymust increase its annual fixed costs by $113,000. The selling price will not change.Contribution Margin Income StatementFor Year Ended December 31Sales (20,000 × $37.50 per unit)..Variable costs (20,000 × $30 per unit).Contribution margin..Fixed costsIncome....$750,000600,000150,000130,000$ 20,000Required1. Compute the break-even point in dollar sales for next year assuming the machine is installed.2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $750,000.3. Compute the sales level required in both dollars and units to earn $87,000 of target income for next year with the machine installed.Check (2) Income, $57,000

Answered: Required 1. Compute the break-even…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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