Required information Problem 21-4A Break-even analysis; income targeting and for

Question

Required information Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 The following information applies to the questions displayed below. Astro Co. sold 20,100 units of ts only product and incurred a $63.560 loss (ignoring toxes) for the current year as shown here. During a planning session for year 2018 s activities, the production manager notes that variable reduced 40% by installing a machine that automates several operations. To increase its annual fixed costs by $151.000. The costs can be obtain these savings, the company must maximum output capacity of the comp any is 40,000 units per year ASTRO COMPANY Contribution Margin I For Year Ended December 31, 2817 $ 755,760 Seles Variable costs Fixed costs

Explanation / Answer

Astro Company Forecasted Contribution margin income statement For year ended december 31, 2018 $ per unit $ Sales $37.60 $     7,55,760 Variable costs $16.92 $     3,40,092 Contribution margin $20.68 $     4,15,668 Fixed costs $     4,03,500 Net income $        12,168 Predicted sales price per unit (no change) = $ 7,55,760 / 20,100 $           37.60 Predicted variable cost per unit = ($ 5,66,820 / 20,100) X 60% (variable cost to be reduced by 40% i.e remaining variable cost is 60%) = $           16.92 Predicted contribution per unit = $ 37.6 - $16.92 $           20.68 Predicted fixed cost = $ 2,52,500 + $ 1,51,000 $     4,03,500

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