Question

Required information Use the following information for the Exercises below. [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (9,600 units at $225 each) $ 2,160,000 Variable costs (9,600 units at $180 each) 1,728,000 Contribution margin $ 432,000 Fixed costs 324,000 Pretax income $ 108,000 Exercise 21-18 Evaluating strategies LO C2 Assume the company is considering investing in a new machine that will increase its fixed costs by $40,500 per year and decrease its variable costs by $9 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.

Answer 1

Forecasted Contribution margin statement if Company purchases the machine

Particulars	If Machine Not Purchased	If machine purchased
Sales	2,160,000	2,160,000
Less:- Variable cost	(1,728,000) [9600 * 180]	1,641,600 [9600 * 171]
Contribution margin	432,000	518,400
Less:- Fixed cost	(324,000)	(364,500)
Pre tax income	108,000	153,900