[The tollowing Astro Co. sold 20,800 units of its only product and incurred a $56,672 loss (ignoring taxes) for the current year, as shown here. During a planning session for year 2020's activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $158,000. The maximum output capacity of the company is 40,000 units per year. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2019 $796,640 637,312 159,328 • 216,000 Sales Variable costs Contribution margin Fixed costs Net loss $(56,672)
[The tollowing Astro Co. sold 20,800 units of its only product and incurred a $56,672 loss (ignoring taxes) for the current year, as shown here. During a planning session for year 2020's activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $158,000. The maximum output capacity of the company is 40,000 units per year. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2019 $796,640 637,312 159,328 • 216,000 Sales Variable costs Contribution margin Fixed costs Net loss $(56,672)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Contribution Margin Income Statement Analysis
**Astro Company Financial Overview:**
Astro Co. sold 20,800 units of its only product and incurred a $56,672 loss (ignoring taxes) for the current year. The company plans for the year 2020 to reduce variable costs by 50% by installing a machine that automates operations. This installation will increase fixed costs by $158,000. The maximum output capacity is 40,000 units per year.
**Income Statement (For Year Ended December 31, 2019):**
- **Sales:** $796,640
- **Variable Costs:** $637,312
- **Contribution Margin:** $159,328
- **Fixed Costs:** $216,000
- **Net Loss:** $(56,672)
### Predicted Break-even Analysis for 2020
Calculate the break-even point in dollar sales assuming the new machine is installed and no change in unit selling price occurs. Round your answers to two decimal places.
#### Tables for Calculation:
1. **Contribution Margin per Unit:**
- Proposed cell to fill with values.
2. **Contribution Margin Ratio:**
- Choose numerator and denominator to calculate the ratio.
3. **Break-even Point Analysis:**
- Calculate using proposed values.
- Proposed cell for break-even point in dollars.
The tables help configure how changes in fixed and variable costs affect the break-even point, crucial for informed decision-making and planning in Astro Co.'s operations.
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