Question

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.) 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. 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.) 12 11 < Prey 13 Next > of 17 !!!

Answer 1

Amount in $ Proposed Per Unit Contribution Margin Per Unit Particualars Current Total Current Quantity 20,300 Per Unit Sales 767,340 37.80 Variable Cost 537,138 26.46 Contribution Margin 230,202 11.34 37.80 13.23 24.57

Contribution Margin Ratio         

      

                     

Break Even Point in $

Proposed Fixed Cost 1 Contribution Margin Ratio Break Even Point in $ 462,000.00 / 0.65 = 710,769

Calculation Table -

Amount in $ Proposed Per Unit Contribution Margin Per Unit Particualars Quantity Sales Variable Cost Contribution Margin Contribution Margin % Proposed Fixed Cost Predicted Break Even Sales in $ 37.80 13.23 24.57 65% 462,000 710,769