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Required: 1. New equipment has come on would be reduced by $6 per un contribution format income stat equipment were purchased.

Required: 1. New equipment has come on would be reduced by $6 per un contribution format income stat equipment were purchased.

FINANCIAL ACCOUNTING
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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Finny Inc's contribution format income statement for the most recent month is given below: Sales (58,000 units) Variable expenses Contribution margin Fixed expenses Net operating income $1,160,000 812,000 348,000 278,400 69,600 $ The industry in which Finny Inc. operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come on the market that would allow Finny Inc. to automate a portion of its operations. Variable expenses would be reduced by $6 per unit. However, fixed expenses would increase to a total of $626,400 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. Amount Present Per Unit Percentage % CAR % % Amount Proposed Per Unit Percentage % % %
Transcribed Image Text:Finny Inc's contribution format income statement for the most recent month is given below: Sales (58,000 units) Variable expenses Contribution margin Fixed expenses Net operating income $1,160,000 812,000 348,000 278,400 69,600 $ The industry in which Finny Inc. operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come on the market that would allow Finny Inc. to automate a portion of its operations. Variable expenses would be reduced by $6 per unit. However, fixed expenses would increase to a total of $626,400 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. Amount Present Per Unit Percentage % CAR % % Amount Proposed Per Unit Percentage % % %
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