IThe following information applies to the questions displayed below Astro Co. so

Question

IThe following information applies to the questions displayed below Astro Co. sold 19,600 units of Iits only product and Incurred a $46,568 loss (ignoring taxes) for the current ar as shown here. During a planning session for year 2016's activitles, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, of the company is 40,000 units per year the company must increase Its annual fixed costs by $146,000. The maximum output capacity ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2015 Sales Varlable costs 727160 581,728 Contribution margin FIxed costs 145,432 192,000 Net loss $ (46,568) References Problem 18-4A Break-even analysis, income targeting and forecasting LO C2, P2, A1 Section Break

Explanation / Answer

Contribution Margin per unit = Total Comtribution Margin / No of units sold

= $145,432 / 19,600 units = $7.42 per unit

Contribution Margin Ratio = ( Contribution / Sales )

Numerator =  $145,432 ; Denominator = $ 727,160 ; Answer = 0.2

Break Even Point in Dollor Sales = ( Fixed Cost / Contribution Margin Ratio )

Numerator =  $192,000 ; Denominator = 0.2 ; Answer = $960,000

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