Question

Required information Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 [The following information applies to the questions displayed below] Astro Co. sold 19,600 units of its only product and incurred a $46,568 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 $146,000. 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 727,160 581,728 Variable costs Contribution margin 145,432 Fixed costs 192,000 $(46,568) Net loss Problem 21-4A Part 5 5. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume no income taxes will be due. (Do not round intermediate calculations. Round "per unit answers" to 2 decimal places.) ASTRO COMPANY Forecasted Contribution Margin Income State ment For Year Ended December 31, 2018 $ Per Unit 37.10 Contribution margin

Answer 1

Solution :-

ASTRO COMPANY
Forecasted Contribution Margin Income Stetement
For Year Ended December 31,2018
	$ Per Unit	$
Sales ( 19600 Units)	$ 37.10	$ 727160
Less :Variable Costs (W Note 1)	$ 14.84	$ 290864
Contribution Margin	$ 22.26	$ 436296
Less :Fixed Costs (W Note 2)		$ 338000
Net Income		$ 98296

W Note 1:- Variable Costs

During 2018, Variable Costs Reduced by 50% by installing a machine , Therefore Variable costs for 2018:-

Variable Costs for 2018 = $ 581728 *50% = $ 290864

Variable Costs for 2018 (Per Unit ) = $ 290864/ 19600 Units = $ 14.84 Per Unit

W Note 2:- Fixed Costs

During 2018, Fixed Costs Increased by $146000 by installing a machine , Therefore Fixed costs for 2018:-

Fixed Costs for 2018 = $ 192000 + $ 146000 = $ 338000