Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A
ID: 2472667 • Letter: P
Question
Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1
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Astro Co. sold 24,000 units of its only product and incurred a $82,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2016’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 $260,000. The maximum output capacity of the company is 40,000 units per year.
Compute the break-even point in dollar sales for year 2015. (Round your answers to 2 decimal places.)
2.
Problem 21-4A Part 2
Compute the predicted break-even point in dollar sales for year 2016 assuming the machine is installed and there is no change in the unit selling price. (Round your answers to 2 decimal places.)
Problem 21-4A Part 3
Prepare a forecasted contribution margin income statement for 2016 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 2 decimal places.)
Astro Co. sold 24,000 units of its only product and incurred a $82,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2016’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 $260,000. The maximum output capacity of the company is 40,000 units per year.
Explanation / Answer
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Break even point ($) 2015 Fixed Cost / P/V ratio P/V ratio Contribution/Sales*100 192000/960000*100 20% Break even sales 274000/0.20 $1370000Related Questions
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