Astro Co. sold 15,000 units of its only product and incurred a $102,000 loss (ig

Question

Astro Co. sold 15,000 units of its only product and incurred a $102,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2014'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 $150,000. The maximum output ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2013 Sales Variable costs $750,000 480,000 Contribution margin Fixed costs 270,000 252,000 Net loss (102.000)

Explanation / Answer

Astro Co. sold 15,000 units of its only product and incurred a $102,000 loss (ig

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