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 Compute the sales level required in both dollars and units to earn $208,000 of target income for next year with the machine nstalled. Sales level required in dollars Numerator: Sales level required in units Numerator: 1 $ 1,000,000 800,000 200,000 175,000 $ 25,000 I 1 Denominator: Denominator: 11 Sales dollars required Sales units required
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 Compute the sales level required in both dollars and units to earn $208,000 of target income for next year with the machine nstalled. Sales level required in dollars Numerator: Sales level required in units Numerator: 1 $ 1,000,000 800,000 200,000 175,000 $ 25,000 I 1 Denominator: Denominator: 11 Sales dollars required Sales units required
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 5EA: Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of...
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