[The tollowing Astro Co. sold 20,800 units of its only product and incurred a $56,672 loss (ignoring taxes) for the current year, as shown here. During a planning session for year 2020's activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $158,000. The maximum output capacity of the company is 40,000 units per year. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2019 $796,640 637,312 159,328 • 216,000 Sales Variable costs Contribution margin Fixed costs Net loss $(56,672)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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### Contribution Margin Income Statement Analysis

**Astro Company Financial Overview:**

Astro Co. sold 20,800 units of its only product and incurred a $56,672 loss (ignoring taxes) for the current year. The company plans for the year 2020 to reduce variable costs by 50% by installing a machine that automates operations. This installation will increase fixed costs by $158,000. The maximum output capacity is 40,000 units per year.

**Income Statement (For Year Ended December 31, 2019):**

- **Sales:** $796,640
- **Variable Costs:** $637,312
- **Contribution Margin:** $159,328
- **Fixed Costs:** $216,000
- **Net Loss:** $(56,672)

### Predicted Break-even Analysis for 2020

Calculate the break-even point in dollar sales assuming the new machine is installed and no change in unit selling price occurs. Round your answers to two decimal places.

#### Tables for Calculation:

1. **Contribution Margin per Unit:** 
   - Proposed cell to fill with values.

2. **Contribution Margin Ratio:**
   - Choose numerator and denominator to calculate the ratio.

3. **Break-even Point Analysis:**
   - Calculate using proposed values.
   - Proposed cell for break-even point in dollars.

The tables help configure how changes in fixed and variable costs affect the break-even point, crucial for informed decision-making and planning in Astro Co.'s operations.
Transcribed Image Text:### Contribution Margin Income Statement Analysis **Astro Company Financial Overview:** Astro Co. sold 20,800 units of its only product and incurred a $56,672 loss (ignoring taxes) for the current year. The company plans for the year 2020 to reduce variable costs by 50% by installing a machine that automates operations. This installation will increase fixed costs by $158,000. The maximum output capacity is 40,000 units per year. **Income Statement (For Year Ended December 31, 2019):** - **Sales:** $796,640 - **Variable Costs:** $637,312 - **Contribution Margin:** $159,328 - **Fixed Costs:** $216,000 - **Net Loss:** $(56,672) ### Predicted Break-even Analysis for 2020 Calculate the break-even point in dollar sales assuming the new machine is installed and no change in unit selling price occurs. Round your answers to two decimal places. #### Tables for Calculation: 1. **Contribution Margin per Unit:** - Proposed cell to fill with values. 2. **Contribution Margin Ratio:** - Choose numerator and denominator to calculate the ratio. 3. **Break-even Point Analysis:** - Calculate using proposed values. - Proposed cell for break-even point in dollars. The tables help configure how changes in fixed and variable costs affect the break-even point, crucial for informed decision-making and planning in Astro Co.'s operations.
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