Required information [The following information applies to the questions displayed below.] Astro Company sold 23,000 units of its only product and reported income of $264,600 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 44% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $156,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($56 per unit) Variable costs ($35 per unit) Contribution margin Fixed costs Income $ 1,288,000 805,000 483,000 218,400 $ 264,600 3. Compute the sales level required in both dollars and units to earn $260,000 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) Answer is complete but not entirely correct. Sales level required in dollars Numerator: Contribution margin $ Sales level required in units Numerator: Fixed costs $ Denominator: 1 Selling price per unit = 21 X 1 56.00% X = $ Sales dollars required 38 Denominator: = Sales units required 5,825 units Contribution margin ratio 218,400 x $ 37.50 X ==
Required information [The following information applies to the questions displayed below.] Astro Company sold 23,000 units of its only product and reported income of $264,600 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 44% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $156,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($56 per unit) Variable costs ($35 per unit) Contribution margin Fixed costs Income $ 1,288,000 805,000 483,000 218,400 $ 264,600 3. Compute the sales level required in both dollars and units to earn $260,000 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) Answer is complete but not entirely correct. Sales level required in dollars Numerator: Contribution margin $ Sales level required in units Numerator: Fixed costs $ Denominator: 1 Selling price per unit = 21 X 1 56.00% X = $ Sales dollars required 38 Denominator: = Sales units required 5,825 units Contribution margin ratio 218,400 x $ 37.50 X ==
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Required information
[The following information applies to the questions displayed below.]
Astro Company sold 23,000 units of its only product and reported income of $264,600 for the current
year. During a planning session for next year's activities, the production manager notes that variable
costs can be reduced 44% by installing a machine that automates several operations. To obtain these
savings, the company must increase its annual fixed costs by $156,000. Total units sold and the selling
price per unit will not change.
ASTRO COMPANY
Contribution Margin Income Statement
For Year Ended December 31
Sales ($56 per unit)
Variable costs ($35 per unit)
Contribution margin
Fixed costs
Income
$ 1,288,000
805,000
483,000
218,400
$ 264,600
3. Compute the sales level required in both dollars and units to earn $260,000 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 dollars
Numerator:
Contribution margin
$
Sales level required in units
Numerator:
Fixed costs
$
Answer is complete but not entirely correct.
Denominator:
X
I
Selling price per unit
21 x
I
56.00%
218,400 x
I
$
Denominator:
Contribution margin ratio
=
Sales dollars required
38
$
=
Sales units required
37.50 x
=
5,825
units](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F72aa5c36-5077-431e-a32a-805e2e329582%2F3606a4ea-352b-4b51-b03f-ce7fb6ef170a%2F8gg8z1_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Astro Company sold 23,000 units of its only product and reported income of $264,600 for the current
year. During a planning session for next year's activities, the production manager notes that variable
costs can be reduced 44% by installing a machine that automates several operations. To obtain these
savings, the company must increase its annual fixed costs by $156,000. Total units sold and the selling
price per unit will not change.
ASTRO COMPANY
Contribution Margin Income Statement
For Year Ended December 31
Sales ($56 per unit)
Variable costs ($35 per unit)
Contribution margin
Fixed costs
Income
$ 1,288,000
805,000
483,000
218,400
$ 264,600
3. Compute the sales level required in both dollars and units to earn $260,000 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 dollars
Numerator:
Contribution margin
$
Sales level required in units
Numerator:
Fixed costs
$
Answer is complete but not entirely correct.
Denominator:
X
I
Selling price per unit
21 x
I
56.00%
218,400 x
I
$
Denominator:
Contribution margin ratio
=
Sales dollars required
38
$
=
Sales units required
37.50 x
=
5,825
units
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