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Determine the sales price per unit under existing conditions

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Question - Benson Company currently produces and sells 8,000 units annually of a product that has a variable cost of $17 per unit and annual fixed costs of $281,000. The company currently earns a $79,000 annual profit. Assume that Benson has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $15 per unit. The investment would cause fixed costs to increase by $9,800 because of additional depreciation cost.

Required -

Use the equation method to determine the sales price per unit under existing conditions (current equipment is used).

Please provide a contribution margin income statement, assuming that Benson invests in the new production equipment.

Reference no: EM132813282

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