Question

Stuart Company currently produces and sells 7,600 units annually of a product that has a variable cost of $11 per unit and annual fixed costs of $269,600. The company currently earns a $80,000 annual profit. Assume that Stuart has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $9 per unit. The investment would cause fixed costs to increase by $9,600 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b. Prepare a contribution margin income statement, assuming that Stuart invests in the new production equipment. Complete this question by entering your answers in the tabs below. Required A Required B Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). Sales price per unit Required A Required B

Answer 1

Let_the_sale price per unit be se! Therefore, sales - Variable coste fixed cost a Profit [7.600 units Xx] - [7,600 units x $11) - $269,600 = $10.000 3,600X - 83,600 - 269,600 2_80,000 3,600x = 433,200 a 433,200 7,600 x= $ 57 Therefore, sale price is $ 57 $57 per unit Puca وور، وه. - این Revised variable cost is $9 per unit Revised_fixed costs $269,600 + $ 9,600 $ 279,200 Contribution margin income statement Cassuming Stuart inverts in the new production equipment). Particulars sales (1.600 x $57) loss, variable cost (7.600 x $9). contribution Lesse fixed cost Profit $ 433,200 (68,400) 364,800 (279,200) foi 85,600. be if_the please feel free to ask any queries and do give thumbrup it_the Solution was satisfactory. Thank you,