Question

Hudson Co. reports the contribution margin income statement for 2015. Assume sales remain constant at 10.000 units.HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2015Sales (10,000 units at $244 each) $2,440,000Variable costs (10,000 units at $195 each) 1,950,000Contribution margin 490,000Fixed costs 327,600Pretax Income $162,400Assume the company is considering investing in a new machine that will increase its fixed costs by $37,000 per year and decrease its variable costs by $8 per unit. Required:Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

Selling price= $244

Unitary variable cost= 195 - 8= $187

Fixed costs= 327,600 + 37,000= $364,600

We need to determine the new pre-tax income:

Sales= 244*10,000= 2,440,000

Total variable cost= 187*10,000= (1,870,000)

Total contribution margin= 570,000

Fixed costs= (364,600)

Pre-tax income= 205,400