1 Required information The fowowing informastion appies to the questions display

Question

1 Required information The fowowing informastion appies to the questions displayed beloww Part 3 of 5 Astro Co sold 19200 units of its only product and incurned a $43,072 loss (anoring taxes) for the current year as show here. During a planning session for year 208s activties, 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 increese its annuel fixed costs by $142000. The maximum output capecity of the compeny is 40,000 units per yeer 744,640 Contribut ion margis Set losrs 3. Prepare a forecested contribution mergin income statement for 2018 that shows the expected results with the machine instaled Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due. (Do not round intermediate celculations. Reund your answers to the nearest whole dellar Forecested Centribution Mrgis Income Stalament Prev16 17 18 of 20Next

Explanation / Answer

* Current variable cost per unit = $ 563,712 / 19,200 units = $ 29.36.

Proposed variable cost per unit = $ 29.36 x 50% = $ 14.68.

Astro Company Forecasted Contribution Margin Income Statement For year ended December 31, 2018 Sales ( 19,200 x $ 36.70) $ 704,640 Variable Costs ( 19,200 x $ 14.68) * 281,856 Contribution Margin 422,784 Fixed Costs 326,000 Net Operating Income $ 96,784

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