50.1K

Verified Solution

Link Copied!

Morton Company?s contribution format income statement for last month is given below:

Sales (47,000 units ? $26 per unit)	$	1,222,000
Variable expenses		855,400
Contribution margin		366,600
Fixed expenses		293,280
Net operating income	$	73,320

The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

Required:

1.

New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $7.80 per unit. However, fixed expenses would increase to a total of $659,880 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. (Round your "Per unit" answers to 2 decimal places.)

Morton Company's contribution format income statement for last month is given below: The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits

Answer & Explanation Solved by verified expert

See Answer