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Saved Help Save 1 0 2 of 4 Required information Problem 18-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 [The following information applies to the questions displayed below.) 3 Astro Co. sold 20,300 units of its only product and incurred a $78,798 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 $153,000. The maximum output capacity of the company is 40,000 units per year eBook Print References ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017 Sales $767.340 Variable costs 537, 138 Contribution margin 230,202 Fixed costs 309,000 Net loss $(78, 798) Problem 18-4A Part 2 2. Compute the predicted break-even point in dollar sales for year 2018 assuming the machine is installed and there is no change in the unit selling price. (Round your answers to 2 decimal places.) < Prev 11 12 13 of 17 Next > ME GE Hill Exam on....docx Case 1 ENTP.docx

Answer 1

Current Selling price (767,340/20,300):	37.8
Current Variable expense (537,138 /20,300):	26.46
Req 2.
Contribution margin per unit		Proposed
Proposed selling price per unit		37.8
Less: Proposed VC per unit (26.46*50%)	13.23
Contribution margin per unit		24.57
Contribution Margin ratio:
Contribution margin per unit    /	Selling price per unit=	Contribution Margin ratio
24.57                                       /	37.80   =		65.00%
Break even in dollars
Revised Fixed cost                  /	Contribution margin ratio =	Break even in dollars
462,000                                    /	65%                                     =	7,10,769
Answer is $ 710,769
Note:
Revised Fixed cost (309,000+153000):	4,62,000