Question

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

Answer 1