M http://ezto.mheducation.com/hm.tpx age-Accounting I.A.. M Chapter 21- Ho [The

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M http://ezto.mheducation.com/hm.tpx age-Accounting I.A.. M Chapter 21- Ho [The following information applies to the questions displayed below/ Astro Co. sold 19,400 units of its only product and incurred a $44,828 loss ignoring taxes) for the current year as shown here. During a planning session for year 2016's activitles, the production manager notes that vanable 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 $144,000. The maximum output copacity of the company is 40.000 units per year ASTRO COMPANY Contibution Margin Income Statement For Year Ended December 31, 2015 Sales Varlable costs s 715,860 572,688 Contribution margin Fixed costs 143,172 188,000 Net loss $ (44,828)

Explanation / Answer

Astro Company Forecasted Contribution Margin Income Statement For the year ended December 31, 2016 Detail Total $ Per unit $ Sales        715,860 36.9 Less: Variable Cost        286,344 14.76 Contribution Margin        429,516 22.14 Fixed Costs        332,000 Net Income          97,516 5.03

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