Question

Assume the company is considering investing in a new machine that will increase its fixed costs by $40,500 per year and decrease its variable costs by $9 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.

Answer 1

Explanation:

The preparation of  forecasted contribution margin income statement for 2018 is shown below:-

Sales (9600 × $225)                                                    $2,160,000

Variable costs = 9600 × (180-9)                                   $1,641,600

Contribution margin                                                       $518,400

Less Fixed costs = 324,000 + 40,500                        $364,500

Pretax Income                                                                 $153900