Question

Need help with this accounting problem please.

Required information Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 [The following information applies to the questions displayed below.) Astro 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 2018'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. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017 Sales $ 767, 340 Variable costs 537, 138 Contribution margin 230, 202 Fixed costs 309,000 Net loss $ (78, 798)

Answer 1

Sales	767,340
Variable costs	537,138
Contribution Margin	230,202
Fixed costs	309,000
Operating income	(78,798)
Contribution Margin per unit	Current
Selling price per unit	37.80
Variable cost per unit	26.46
Contribution Margin per unit	11.34
Contribution Margin/Sales = Contribution Margin ratio
30.00%
Fixed costs/Contribution margin ratio = Break even point in Dollar Sales
1,030,000.00
Contribution Margin per unit	Proposed
Selling price per unit	37.80
Variable cost per unit	13.23
Contribution Margin per unit	24.57
Contribution Margin/Sales = Contribution Margin ratio
65.00%
Fixed costs/Contribution margin ratio = Break even point in Dollar Sales
710,769.23
Forecasted Income Statement
Sales	767,340
Variable costs	268,569
Contribution Margin	498,771
Fixed costs	462,000
Operating income	36,771
(Target Income + Fixed costs)/Contribution Margin Ratio = Sales Dollars Required
1,064,615.38
(Target Income + Fixed costs)/Contribution Margin per unit = Sales units Required
28,164.43	units
Forecasted Income Statement
	per unit
Sales	37.80	1,064,615
Variable costs	13.23	372,615
Contribution Margin	24.57	692,000
Fixed costs		462,000
Operating income		230,000