Compute the sales level required in both dollars and units

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Reference no: EM13573110

etson Co. sold 20,600 units of its only product and incurred a $55,028 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2012 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 $156,000. The maximum output capacity of the company is 40,000 units per year.

Contribution Margin Income Statement

For Year Ended December 31, 2011 Sales 784,860

Variable costs 627,888

Contribution margin 156,972

Fixed costs 212,000

Net loss (55,028)
Required:

1.Compute the break-even point in dollar sales for year 2011.

2.Compute the predicted break-even point in dollar sales for year 2012 assuming the machine is installed and there is no change in the unit sales price. (Round your intermediate calculations to 2 decimal places and final answer to nearest dollar amount

3.Prepare a forecasted contribution margin income statement for 2012 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold (20,600 units) will not change, and no income taxes will be due. (Input all amounts as positive values.

4.vAssume that the income tax rate is 30%. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole number

5.Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume an income tax rate of 30%. (Input all amounts as positive values. Round your "Sales level required in units" to nearest whole number. Round your intermediate calculations to 2 decimal places and final answers to the nearest whole number.

Reference no: EM13573110

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