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Campbell Company currently produces and sells 8,100 units annually of a product that has a...

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Accounting

Campbell Company currently produces and sells 8,100 units annually of a product that has a variable cost of $14 per unit and annual fixed costs of $307,800. The company currently earns a $81,000 annual profit. Assume that Campbell has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $12 per unit. The investment would cause fixed costs to increase by $10,400 because of additional depreciation cost.

Required

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

  2. Prepare a contribution margin income statement, assuming that Campbell invests in the new production equipment.

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Use the equation method to determine the sales Sales price per unit CAMPBELL COMPANY Contribution margin Income statement

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