Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Astro Company sold 21,000 units of its only product and reported income of $84,800 for the current year.
During a planning session for next year's activities, the production manager notes that variable costs can be reduced 48% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $152,000. Total units sold and the selling price per unit will not change.
ASTRO COMPANY
Contribution Margin Income
Statement
For Year Ended December 31
Sales ($52 per unit) $ 1,092,000
Variable costs ($44 per unit) 924,000
Contribution margin 168,000
Fixed costs
83,200
Income
$ 84,800
3. Compute the sales level required in both dollars and units to earn 220000 of target income for next year with the machine installed.
Note: do not round intermediate calculations. Round your answers to decimal places. Round
"contributions margin ratio" to nearest whole percentage.
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