Compute the sales level required in both dollars and units

Reference no: EM13581399

Jetson Co. sold 19,200 units of its only product and incurred a $43,072 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2012'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 $142,000. The maximum output capacity of the company is 40,000 units per year.

JETSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31, 2011

Sales $704,640

Variable costs 563,712

Contribution margin 140,928

Fixed costs 184,000

Net loss $(43,072)

1. Compute the break-even point in dollar sales for year 2011. (Round your intermediate calculations to 2 decimal places and final answer to nearest dollar amount. Omit the "tiny_mce_markerquot; sign in your response.)

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. Omit the "tiny_mce_markerquot; sign in your response.)

3. Compute the sales level required in both dollars and units to earn $96,000 of after-tax income in 2012 with the machine installed and no change in the unit sales price. Assume that the income tax rate is 20%. (Round your intermediate calculations to 2 decimal places and always round up (ceiling rounding) your final answers to the next whole number. Omit the "tiny_mce_markerquot; sign in your response.)

4.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 20%. (Use the units in your answer from Part 4 in your calculation of Sales and Variable Cost. Your Net Income might be higher than required amount due to rounding. 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. Omit the "tiny_mce_markerquot; sign in your response.)

Reference no: EM13581399

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