Question

Problem 18-4A Break-even analysis, income targeting and forecasting LO C2, P2, A1 The following information applies to the questions displayed below. Astro Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2018's activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $200,000. The maximum output capacity of the company is 40,000 units per year ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017 Sales Variable costs Contribution margin Fixed costs Net loss $1,000,000 800,000 200,000 250,000 $(50,000) Problem 18-4A Part 1 Required 1. Compute the break-even point in dollar sales for year 2017 Contribution Margin Per Unit Current Sales Variable costs Contribution margin Contribution Margin Ratio Choose Numerator: Choose Denominator: Contribution Margin Ratio Contribution margin ratio ixed costs per unit ak-Even Point in Dollar Sales: Choose Numerator: Choose Denominator: Break-Even Point in Dollars Break-even point in dollars

Answer 1