Required information [The following information applies to the questions display

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Required information [The following information applies to the questions displayed below.] Astro Co. sold 19,500 units of its only product and incurred a $45,700 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 $145,000. 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 Variable costs Contribution margin Fixed costs Net loss $ 721,500 577.200 144,300 190,000 $ (45,700) Requirec 1. Compute the break-even point in dollar sales for year 2017. (Round your answers to 2 decimal places.) Contribution Margin Per Unit Current Contribution Margin Ratio Choose Numerator: Choose Denominator:Contribution Margin Ratio Contribution margin ratio ak-Even Point in Dollar Sales: Choose Numerator: Choose Denominator:Break-Even Point in Dollars Break-even point in dollars

Explanation / Answer

Answer 1:

Sales per unit = Sales / No. of Units
Sales per unit = $721,500 / 19,500
Sales per unit = $37

Variable cost per unit = Variable Cost / No. of Unit
Variable cost per unit = $577,200 / 19,500
Variable Cost per unit = $29.6

Contribution Margin per unit = Sales per unit – Variable costs per unit
Contribution Margin per unit = $37 - $29.6
Contribution Margin per unit = $7.4

Contribution Margin Ratio = Contribution Margin per unit / Sales per unit *100
Contribution Margin Ratio = $7.4 / $37 *100
Contribution Margin Ratio = 20%

Break-Even Point in Dollar Sales = Fixed Costs / Contribution Margin Ratio
Break- Even Point in Dollar Sales = $190,000 / 0.2
Break-Even Point in Dollar Sales = $950,000

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