Chapter 21, Problem 4APSA

To determine

Introduction:

The point when a security’s market price equates to its actual cost that is the original cost, is called the breakeven point. In cost accounting, this is the point at which the total revenue and total costs become the same.

To calculate:

1. The break-even point in dollar sales.

2. The predicted break-even point in dollar sales for the next year, assuming machine is installed and there is no change in the unit selling price.

3. To prepare a forecasted contribution margin income statement that shows the expected results with machine installed, assuming unit selling price and number of units sold will not change and no income taxes will be due.

4. The sales level required in both dollars and units to earn $200,000 of target per tax income with machine installed and no change in unit sales price.

5. To prepare a forecasted contribution margin income statement showing results at sales level calculated in part 4, and assuming no income taxes will be due.