Compute the break-even point in dollar sales for year

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Reference no: EM131204894

[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 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 $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, 2015 Sales $ 721,500 Variable costs 577,200 Contribution margin 144,300 Fixed costs 190,000 Net loss $ (45,700 ) Required: 1. Compute the break-even point in dollar sales for year 2015. (Round your answers to 2 decimal places.) 2. 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.) 3. 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.) 4. 4. Compute the sales level required in both dollars and units to earn $150,000 of target pretax income in 2016 with the machine installed and no change in unit sales price. (Do not round intermediate calculations. Round your answers to 2 decimal places. Round "Contribution margin ratio" to nearest whole percentage) 5. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume no income taxes will be due. (Do not round intermediate calculations. Round "per unit answers" to 2 decimal places and other answers to nearest whole dollar.)

Reference no: EM131204894

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