Astro Company sold 20,000 units of its only product and reported income of $25,000 for...
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Accounting
Astro Company sold 20,000 units of its only product and reported income of $25,000 for the current year. During a planning session for next years 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 $241,000. The selling price per unit will not change.
1. Compute the break-even point in dollar sales for next year assuming the machine is installed.
2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume sales are $1,000,000.
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