Question

Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,800 units at $280 each) $ 2,744,000 Variable costs (9,800 units at $210 each) 2,058,000 Contribution margin 686,000 Fixed costs 504,000 Pretax income $ 182,000 Assume the company is considering investing in a new machine that will increase its fixed costs by $41,500 per year and decrease its variable costs by $8 per unit. Prepare a forecasted contribution margin income statement for 2020 assuming the company purchases this machine.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019

Sales (9,800 units at $280 each) $ 2,744,000

Variable costs (9,800 units at $210 each) 2,058,000

Contribution margin 686,000

Fixed costs 504,000

Pretax income $ 182,000

Assume the company is considering investing in a new machine that will increase its fixed costs by $41,500 per year and decrease its variable costs by $8 per unit.

We will assume that sales remain the same.

Contribution margin income statement:

Sales= 2,744,000

Variable costs= (202*9,800)= (1,979,600)

Contribution margin= 764,400

Fixed costs= (504,000 + 41,500)= (545,500)

Pretax income= 218,900