M http://ezto ation.com/hm.tp o-clHomepage . Accounting ll-A.. | M chapter 21- T
ID: 2427127 • Letter: M
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M http://ezto ation.com/hm.tp o-clHomepage . Accounting ll-A.. | M chapter 21- The following information applies to the questions displayed below Astro Co. sold 19,400 units of its only product and incurred a $44,828 loss ignorting taxes) for the current year as shown here. During a planning session for year 2016's activities, the production manager notes that variable costs can be reduced 50% by installing e machine that automates several operations To coan these savings, the company must increase ts annual fixed costs by $144,000 The maximum output cepacity of the company is 40,000 units per year ASTRO COMPANY Contribution Margin Income Statement s 715,860 572.688 143,172 188,000 Fixed costs $ (44828)Explanation / Answer
Income statement for 2016
sales 715860
less variable cost[572688 - 50%*572688] 286344
contribution 429516
less: fixed cost[188000+1440000] 332000
net profit 97516
break even sale in dollar = 332000 / contribution margin ratio
=332000 / ( 429516 /715860)
=332000 / 0.6
=$553333.33
1. contribution margin per unit = 429516 / 19400 units
= $22.14
.
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