Question

In: Accounting

Astro Co. sold 20,700 units of its only product and incurred a $83,778 loss (ignoring taxes)...

Astro Co. sold 20,700 units of its only product and incurred a $83,778 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 $157,000. 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 $ 790,740
Variable costs 553,518
Contribution margin 237,222
Fixed costs 321,000
Net loss $ (83,778 )

Required:

Part 1. Compute the break-even point in dollar sales for year 2017. (Round your answers to 2 decimal places.)

Part 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.)

Contribution margin per unit Proposed
Contribution Margin Ratio
Choose Numerator: / Choose Denominator: = Contribution Margin Ratio
/ = Contribution margin ratio
Break-even point in dollar sales with new machine:
Choose Numerator: / Choose Denominator: = Break-Even Point in Dollars
/ = Break-even point in dollars

Part 3. Prepare a forecasted contribution margin income statement for 2018 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.)

ASTRO COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2018
Contribution margin

Solutions

Expert Solution

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Astro Co. sold 20,700 units of its only product and incurred a $83,778 loss (ignoring taxes)...
Astro Co. sold 20,700 units of its only product and incurred a $83,778 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 $157,000. The maximum output capacity of the company is 40,000 units per year. ASTRO COMPANY Contribution Margin...
Astro Co. sold 20,900 units of its only product and incurred a $71,860 loss (ignoring taxes)...
Astro Co. sold 20,900 units of its only product and incurred a $71,860 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 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $159,000. The maximum output capacity of the company is 40,000 units per year. A. Compute the break-even...
Astro Co. sold 19,500 units of its only product and incurred a $45,700 loss (ignoring taxes)...
Astro Co. sold 19,500 units of its only product and incurred a $45,700 loss (ignoring 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 $145,000. The maximum output capacity of the company is 40,000 units per year. ASTRO COMPANY Contribution Margin...
Blue Company sold 30,000 units of its only product and incurred a $85,000 loss (ignoring taxes)...
Blue Company sold 30,000 units of its only product and incurred a $85,000 loss (ignoring 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 25% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $175,000. The maximum output capacity of the company is 55,000 units per year. Blue Company Contribution Margin...
Required information [The following information applies to the questions displayed below.] Astro Co. sold 20,900 units...
Required information [The following information applies to the questions displayed below.] Astro Co. sold 20,900 units of its only product and incurred a $71,860 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 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $159,000. The maximum output capacity of...
1. Ignoring trading costs and taxes, what is the total profit or loss on each of...
1. Ignoring trading costs and taxes, what is the total profit or loss on each of the following investments? a) You sold (wrote) three TXA call option contracts with a strike price of $35 when the option was quoted at $2.60. The option expires today when the value of TXA stock is $33.70. b) You sold five put option contracts on QLN stock with an exercise price of $45 and an option price of $2.20. Today, the option expires and...
This year Cairo Company sold 30,000 units of its only product for $19.00 per unit. Manufacturing...
This year Cairo Company sold 30,000 units of its only product for $19.00 per unit. Manufacturing and selling the product required $115,000 of fixed manufacturing costs and $175,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 3.50   Direct labor (paid on the basis of completed units) 2.50   Variable overhead costs 0.35   Variable selling and administrative costs 0.15 Next year the company will use new material, which will reduce material costs by 60%...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing and selling the product required $114,000 of fixed manufacturing costs and $174,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 3.40   Direct labor (paid on the basis of completed units) 2.40   Variable overhead costs 0.34   Variable selling and administrative costs 0.14 Next year the company will use new material, which will reduce material costs by 70%...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing and selling the product required $114,000 of fixed manufacturing costs and $174,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 3.40   Direct labor (paid on the basis of completed units) 2.40   Variable overhead costs 0.34   Variable selling and administrative costs 0.14 Next year the company will use new material, which will reduce material costs by 70%...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing and selling the product required $114,000 of fixed manufacturing costs and $174,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 3.40   Direct labor (paid on the basis of completed units) 2.40   Variable overhead costs 0.34   Variable selling and administrative costs 0.14 Next year the company will use new material, which will reduce material costs by 70%...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT