90.2K

Verified Solution

Link Copied!

Forecasting Read the scenario below and follow the instructions to complete the assignment. Astro Co. sold 20,000 units of its only product in 2019 and incurred a $50,000 loss (ignoring taxes) for the current year, as shown here. During a planning session for year 2018'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 $200,000 The maximum output capacity of the company is 40,000 units per year. ASTRO COMPANY Contribution Margin Income Statement Sales ............ Variable costs ........ Contribution margin....... Fixed costs Net loss.. $1,000,000 800,000 200.000 250,000 $ (50,000 1. Compute the break-even point in dollar sales for year 2019. 2. Compute the predicted break-even point in dollar sales for year 2020 assuming the machine is installed and there is no change in the unit selling price. 3. Prepare a forecasted contribution margin income statement for 2020 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due. 4. Compute the sales level required in both dollars and units to earn $200,000 of target pretax income in 2020 with the machine installed and no change in unit sales price. Round answers to whole dollars and whole units

Answer & Explanation Solved by verified expert

See Answer