[The following information applies to the questions displayed below.] Astro Company sold 20,000 units of its only product and reported income of $25,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $241,000. The selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) Variable costs ($40 per unit) Contribution margin Fixed costs Income 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. Contribution Margin Per Unit Contribution Margin Ratio Numerator: 1 1 $ 1,000,000 800,000 200,000 175,000 $ 25,000 Break-Even Point in Dollar Sales with New Machine: Numerator: 1 1 Proposed Denominator: Denominator: = = Contribution Margin Ratio Contribution margin ratio Break-Even Point in Dollars Break-even point in dollars

[The following information applies to the questions displayed below.] Astro Company sold 20,000 units of its only product and reported income of $25,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $241,000. The selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) Variable costs ($40 per unit) Contribution margin Fixed costs Income 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. Contribution Margin Per Unit Contribution Margin Ratio Numerator: 1 1 $ 1,000,000 800,000 200,000 175,000 $ 25,000 Break-Even Point in Dollar Sales with New Machine: Numerator: 1 1 Proposed Denominator: Denominator: = = Contribution Margin Ratio Contribution margin ratio Break-Even Point in Dollars Break-even point in dollars

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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