ttps//n nnect.htmretumUrih F paamweb%2Findex.html%23%21 Astro Co. sold 19.200 un
ID: 2401760 • Letter: T
Question
ttps//n nnect.htmretumUrih F paamweb%2Findex.html%23%21 Astro Co. sold 19.200 units of its only product and incurred a $43,072 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2018's activitles, 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 $142.000. The maximum output capacity of the company is 40,000 units per year Margin Incone 704,64e Variable costs Contribution margin Fixed costs Net loss 5 (43,072) Required: 1. Compute the break-even point in dollar sales for year 2017, (Round your answers to 2 decimal places.) 9.200 00 Per uni Per unit 19.200 00 Per unit margin pe Choose De Broak Even Point in Total ed margin ratio Break-even point in dolar Piey 8910 2f 12 NetExplanation / Answer
Solution:
Current contribution margin = $140,928
Contribution margin ratio = Contribution margin / Sales = $140,928 / $704,640 = 20%
Fixed costs = $184,000
Breakeven sales in dollar = Fixed costs / contribution margin ratio = $184,000 / 20%
= $920,000
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