Question

Required information [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 lignoring taxes) for the current year, as shown here. During a planning session for year 2020'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, 2019 Sales $1,000,000 Variable costs 800,000 Contribution margin 200,000 Tixed costs 250,000 Net loss 9 (50,000) Required: 1. Compute the break even point in dollar sales for 2019 Contribution Margin Per Unit Current Year Contribution Margin Ratio Choose Numerator: Choose Denominator: Contribution Margin Ratio Contribution margin ratio 0 Break Even Point in Dollar Sales: Choose Numerator: Choose Denominator: Break Even Point in Dollars Break-even point in dollars 0

Answer 1

Solution:

The break even point in dollar sales

9 Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Page Layout Formulas Data Review View X % Cut AutoSum Calibri 11 A A z Wrap Text General Normal Bad Good La Copy Fill Paste B 1 U- A, *Merge & Center GP, % Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Styles Cells E14 fac А B С D E F G H J K 1 M N O Р 1 2 3 1 Current year 50 4 5 units sold loss variable cost reduced increased its annual fixed cost maximum output capacity 20,000 50,000 50% 2,00,000 40,000 sales variable costs Contribution margin Fixed costs Net loss 10,00,000 8,00,000 2,00,000 2,50,000 -50,000 40 per unit per unit per unit 6 10 7 8 Contribution margin per unit Sales Variable costs Contribution margin Contribution margin Ratio Choose Numerator Contribution margin per unit 10 Break even point in dollar sales: Choose Numerator Total fixed costs 2,50,000 9 Choose denominator Sales per unit 50 / / = Contribution margin Ratio Contribution margin ratio 20 % = = Choose denominator Contribution margin ratio 20 Break even point in dollars Break even point in dollars 1250000 Proposed 50 20 per unit per unit per unit 30 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Contribution margin per unit Sales Variable costs Contribution margin Contribution margin Ratio Choose Numerator Contribution margin per unit 30 Break even point in dollar sales: Choose Numerator Total fixed costs 4,50,000 Choose denominator Sales per unit 50 = Contribution margin Ratio Contribution margin ratio 60 % = Choose denominator Contribution margin ratio 60 Break even point in dollars Break even point in dollars 750000 31 32 units sold loss variable cost reduced Sheet155 Sheet156 20,000 sales 50,000 variable costs 50% Contribution margin Sheet157 Sheet158 Sheet159 Sheet160 10,00,000 8,00,000 200 000 Sheet161 Sheet162 3 ASTRO COMPANY Forecasted contribution margin income statement For the Year Ended December 31 2020 Sheet163 Sheet164 Sheet165 Ready OM 100% U 1 Type here to search O חד 34% O » ENG 03:02 19-09-2020

Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Page Layout Formulas Data Review View X % Cut AutoSum Calibri 11 A A z Wrap Text General Normal Bad Good Ea Copy Fill Paste B 1 U- *Merge & Center Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Styles Cells E14 fac A B с D E F G H K 1 M N O Р 4,50,000 60 750000 27 28 29 30 31 32 3 units sold loss variable cost reduced increased its annual fixed cost maximum output capacity Target pretax income 20,000 50,000 50% 2,00,000 40,000 2,00,000 sales variable costs Contribution margin Fixed costs Net loss 10,00,000 8,00,000 2,00,000 2,50,000 -50,000 33 34 ASTRO COMPANY Forecasted contribution margin income statement For the Year Ended December 31, 2020 Sales 10,00,000 Variable costs 4,00,000 Contribution margin 6,00,000 Fixed costs 4,50,000 Net Income 1,50,000 35 36 4 37 38 39 40 41 42 = Choose denominator Contribution margin ratio 60 Sales dollars required Sales dollars required 1083333 Sales level required in dollars Choose Numerator Fixed costs plus pretax income 6,50,000 Sales level required in units Choose Numerator Fixed costs plus pretax income 6,50,000 43 / Choose denominator Contribution margin per unit 30 Sales units required Sales units required 21667 units 5 44 45 46 47 48 49 50 51 52 53 54 55 ASTRO COMPANY Forecasted Contribution Margin Income statement For the Year Ended December 31,2020 Per unit $ Sales 50 Variable costs 20 Contribution Margin 30 Fixed costs Income berfore taxes 1083333 433340 650010 4,50,000 2,00,010 56 57 58 Sheet155 Sheet156 Sheet157 Sheet158 Sheet159 Sheet160 Sheet161 Sheet162 Sheet163 Sheet164 Sheet165 Ready OM 100% 1 Type here to search O חד 34% O » ENG 03:02 19-09-2020

9 Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Page Layout Formulas Data Review View X % Cut AutoSum Calibri 11 A A z Wrap Text General Normal Bad Good la Copy Fill Paste B 1 U- A, Merge & Center Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Styles Cells D13 fac A B с D E F G H J K L M N 0 1 2 3 1 Current year 4 5 units sold 20000 loss 50000 variable cost reduced 0.5 increased its annual fixed cost 200000 maximum output capacity 40000 sales 1000000 variable costs 800000 Contribution margin =F3-F4 Fixed costs 250000 Net loss =F5-F6 =F3/C3 =F4/C3 =K4-65 per unit per unit per unit 6 7 8 Contribution margin per unit Sales Variable costs Contribution margin Contribution margin Ratio Choose Numerator Contribution margin per unit =K6 Break even point in dollar sales: Choose Numerator Total fixed costs =F6 Choose denominator Sales per unit =K4 = Contribution margin Ratio Contribution margin ratio =110/K10*100 % / = Choose denominator Contribution margin ratio Break even point in dollars Break even point in dollars =114/K14% =M10 2 Proposed =F3/C3 =K5-(K5*C5) =K17-K18 per unit per unit per unit 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Contribution margin per unit Sales Variable costs Contribution margin Contribution margin Ratio Choose Numerator Contribution margin per unit =K19 Break even point in dollar sales: Choose Numerator Total fixed costs =F6+C6 Choose denominator Sales per unit =K17 Contribution margin Ratio Contribution margin ratio =123/K23*100 % = = Choose denominator Contribution margin ratio =M23 Break even point in dollars Break even point in dollars =127/K27% units sold loss variable cost reduced Sheet155 Sheet156 20000 50000 05 Sheet157 Sheet158 sales 1000000 variable costs 800000 Contribution margin =F30-F31 Sheet159 Sheet160 Sheet161 3 ASTRO COMPANY Forecasted contribution margin income statement For the Year Ended December 31 2020 Sheet163 Sheet164 Sheet165 Sheet162 Ready O 100% 1 Type here to search i 34% O » ENG 03:03 19-09-2020

9 Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Page Layout Formulas Data Review View X % Cut AutoSum Calibri 11 A A z Wrap Text General Normal Bad Good la Copy Fill- Paste B 1 a: Merge & Center Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Styles Cells D13 fac A B С D E F G H 1 j L 0 = Total fixed costs =F6+C6 Contribution margin ratio =M23 M м. N Break even point in dollars =127/K27% / = 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 units sold 20000 loss 50000 variable cost reduced 0.5 increased its annual fixed cost 200000 maximum output capacity 40000 Target pretax income 200000 sales 1000000 variable costs 800000 Contribution margin =F30-F31 Fixed costs 250000 Net loss =F32-F33 3 ASTRO COMPANY Forecasted contribution margin income statement For the Year Ended December 31, 2020 Sales =F30 Variable costs =F31-(F31*C32) Contribution margin =J33-134 Fixed costs =F33+C33 Net Income =J35-136 4 Choose denominator Contribution margin ratio =J35/133*100 Sales dollars required Sales dollars required =ROUND(142/K42%,01 Sales level required in dollars Choose Numerator Fixed costs plus pretax income =C35+)36 Sales level required in units Choose Numerator Fixed costs plus pretax income =142 / Choose denominator Contribution margin per unit =J35/C30 Sales units required Sales units required =ROUND(146/K46,0) units 5 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 ASTRO COMPANY Forecasted Contribution Margin Income statement For the Year Ended December 31,2020 Per unit $ Sales =ROUND(K52/M46,0) =M42 Variable costs =(F31-(F31*C32))/C30 =J53*M46 Contribution Margin =J52-J53 =M46*154 Fixed costs =F33+C33 Income berfore taxes =K54-655 Sheet155 Sheet156 Sheet157 Sheet158 Sheet159 Sheet160 Sheet161 Sheet162 Sheet163 Sheet164 Sheet165 Ready M 100% 1 Type here to search O חד 34% O » ENG 03:03 19-09-2020