Frieden Company's contribution format income statement for the most recent month is given below: Sales (40,000 units) Variable expenses Contribution margin Fixed expenses $ 540,000 580,000 252,000 201,600 $50,400 Net operating income The industry in which Frieden 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 on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $6.30 per unit. However, fixed expenses would increase to a total of $453,600 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. (Input all amounts as positive values except losses which should be indicated by minus sign. Round your "Per unit" answers to 2 decimal places.)
Frieden Company's contribution format income statement for the most recent month is given below: Sales (40,000 units) Variable expenses Contribution margin Fixed expenses $ 540,000 580,000 252,000 201,600 $50,400 Net operating income The industry in which Frieden 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 on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $6.30 per unit. However, fixed expenses would increase to a total of $453,600 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. (Input all amounts as positive values except losses which should be indicated by minus sign. Round your "Per unit" answers to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Frieden Company's contribution format income statement for the most recent month is given below:
Sales (40,000 units)
Variable expenses
Contribution margin
Fixed expenses
$ 840,000
588,000
252,908
201,600
Net operating income
$ 50, 400
The industry in which Frieden 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 on the market that would allow Frieden Company to automate a portion of its operations. Variable
expenses would be reduced by $6.30 per unit. However, fixed expenses would increase to a total of $453,600 each month. Prepare
two contribution format income statements: one showing present operations, and one showing how operations would appear if the
new equipment were purchased. (Input all amounts as positive values except losses which should be indicated by minus sign.
Round your "Per unit" answers to 2 decimal places.)
Amount
Present
Per Unit
0 $
0.00
Percentage
196
196
0%
Amount
Proposed
Per Unit
0 $
0
0.00
Percentage
"6
16
0%
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