Prepare a forecasted contribution margin income statement

Reference no: EM13581482

Astro Co. sold 19,700 units of its only product and incurred a $59,290 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2014's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $147,000. The maximum output capacity of the company is 40,000 units per year.

ASTRO COMPANY
Contribution Margin Income Statement
For Year Ended December 31, 2013

Sales $732,840 Variable costs 549,630 Contribution margin 183,210 Fixed costs 242,500 Net loss $(59,290)

1) Compute the break-even point in dollar sales for year 2013.

2) Compute the predicted break-even point in dollar sales for year 2014 assuming the machine is installed and there is no change in the unit sales price.

3) Prepare a forecasted contribution margin income statement for 2014 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold will not change, and no income taxes will be due.

4) Compute the sales level required in both dollars and units to earn $118,999 of after-tax income in 2014 with the machine installed and no change in the unit sales price. Assume that the income tax rate is 30%. (Round Sales Dollars and Sales Units to a whole number. )

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%.

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

Sales

732,840

Variable costs

549,630

Contribution margin

183,210

Fixed costs

242,500

Net loss

(59,290

)

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%. (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 "$" sign in your response.)

JETSON COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2012
(Click to select)Rent on factoryFactory maintenanceSalesIncome taxesSales commissions	$
(Click to select)Income before taxesFactory maintenanceSales commissionsIncome taxesVariable costs

(Click to select)Contribution marginGross profit
(Click to select)SalesFactory maintenanceFixed costsOffice equipment leaseSales commissions

(Click to select)Sales commissionsIncome before income taxesFactory maintenanceTaxes on factoryOffice equipment lease
(Click to select)Rent on factoryTaxes on factoryOffice equipment leaseSales comissionsIncome taxes

(Click to select)Net lossNet income	$

Reference no: EM13581482

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