Question

Chapter 18 Homework, Part I Help Save & Exit Submit Check my work Part 2 of 2 Required information The following information applies to the questions displayed below.) Hudson Co. reports the contribution margin income statement for 2017 points HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (11,100 units at $375 each) Variable costs (11,100 units at $300 each) Contribution margin Fixed costs Pretax income eBook $4,162,500 3,330,000 $ 832,500 660,000 $ 172,500 Hint Print References Assume the company is considering investing in a new machine that will increase its fixed costs by $38,000 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. HUDSON CO. Forecasted Contribution Margin Income Statement For Year Ended December 31, 2018 Sales Variable rate

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Answer 1

Hudson Co. Forecasted Contribution Margin Income Statement For Year Ended December 31, 2018 Sales 4162500 Variable costs 3230100 Contribution margin 932400 Fixed costs 698000 Income (pretax) 234400 Sales (11,100 x $375) Variable costs (11,100 x $291*) Fixed costs ($660,000 + $38,000) 4162500 3230100 698000 *Revised variable costs = $300-$9 = $291 per unit

The pretax Income is positive so the company should purchase the machine.