Prepare a forecasted contribution margin income statement

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Question - Jetson Co. sold 20,300 units of its only product and incurred a $78,798 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 $153,000. 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

$767,340

Variable costs

537,138

Contribution margin

230,202

Fixed costs

309,000

Net loss

$(78,798)

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 (20,300 units) will not change, and no income taxes will be due.

Reference no: EM131815894

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