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 20,400 units of its only product and incurred a $53,368 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 $154,000. 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 $773,160 Variable costs 618,528 Contribution margin 154,632 Fixed costs 208,000 Net loss $ (53, 368) 2. Compute the predicted break-even point in dollar sales for year 2018 assuming the machine is installed and there is no change in the unit selling price. (Round your answers to 2 decimal places.) Contribution margin per unit Proposed Contribution Margin Ratio Choose Numerator: Choose Denominator: Contribution Margin Ratio Contribution margin ratio Break-even point in dollar sales with new machine: Choose Choose Numerator: Denominator: Break-Even Point in Dollars Break-even point in dollars

Explanation / Answer

Answer:

Break even point in dollar sales with new machine (Amount in $) Contribution margin per unit = Sales price per unit - variable cost per unit Year 2017 Sales 773,160 Variable Costs 618,528 Sales in Units 20,400 Sales in Units 20,400 Sales price per unit 37.9 Variable cost per unit 30.32 So, Contribution margin per unit 37.9 - 30.32 = 7.58 Contribution margin ratio = Contribution margin / Sales Answer 1,54,632 / 7,73,160 20.00% Year 2018 Break Even point in units = Fixed Cost / Contribution margin per unit That is, 1,54,000 / 7.58 Break Even point in units   20,317 units Break Even point in Dollars = Sales price per units * Break Even Point in Units That is, 20,316.62 * 37.9 Break Even point in Dollars = 770,000

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