Frieden Company\'s contribution format income statement for the most recent mont

Question

Frieden Company's contribution format income statement for the most recent month is given below: Sales (41,000 units) $ 1,189,000 Variable expenses 832,300 Contribution margin 356,700 Fixed expenses 285,360 Net operating income $ 71,340 Required: 1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $8.70 per unit. However, fixed expenses would increase to a total of $642,060 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. 4.)Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company

Explanation / Answer

Hi, Please find the answers as follows: Present Operations: Sales 1189000 Variable Expenses 832300 Contribution 356700 Fixed Expenses 285360 Net Profit 71340 With the Purchase of new Equipment Sales 1189000 Variable Expenses (41000*11.6) 475600 Contribution 713400 Fixed Expenses 642060 Net Profit 71340 Part B: Break Even Point = 356700/(29 - 20.3) = 41000 With a fixed cost of 356700, break even point would be at 41000 units only. Thanks.

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