Compute the sales level required in both dollars and units to earn $120,000 of target income for next year with the machine installed. Astro Company sold 28,500 units of its only product and reported income of $57,900 for the current year. During a planning session for next year’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 $142,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) $ 1,425,000 Variable costs ($47 per unit) 1,339,500 Contribution margin 85,500 Fixed costs 27,600 Income $ 57,900
Compute the sales level required in both dollars and units to earn $120,000 of target income for next year with the machine installed. Astro Company sold 28,500 units of its only product and reported income of $57,900 for the current year. During a planning session for next year’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 $142,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($50 per unit) $ 1,425,000 Variable costs ($47 per unit) 1,339,500 Contribution margin 85,500 Fixed costs 27,600 Income $ 57,900
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Compute the sales level required in both dollars and units to earn $120,000 of target income for next year with the machine installed.
Astro Company sold 28,500 units of its only product and reported income of $57,900 for the current year. During a planning session for next year’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 $142,000. Total units sold and the selling price per unit will not change.
| ASTRO COMPANY | |
| Contribution Margin Income Statement | |
| For Year Ended December 31 | |
| Sales ($50 per unit) | $ 1,425,000 |
|---|---|
| Variable costs ($47 per unit) | 1,339,500 |
| Contribution margin | 85,500 |
| Fixed costs | 27,600 |
| Income | $ 57,900 |
Transcribed Image Text:Sales level required in dollars
Numerator:
Sales level required in units
Numerator:
1
1
1
1
Denominator:
Denominator:
11
= Sales dollars required
||
= Sales units required
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