Question

Astro 19,300 units of its only product and incurred a $ 54,940 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 40 % by installing a machine that automates several operations . To obtain these savings , the company must increase its annual costs by . The maximum output capacity of the company is units per year . \$143,000; 40, 000 ASTRO COMPANY Contribution Margin Statement For Year Ended December 31 , 2019 719,240 costs Contribution margin (532, 680)/(177, 560); 232, 599; 5(54, 948) Repuired . 1. Compute the break even point in dollar sales for 2019 ( Round your answers to 2 decimal places . )

Answer 1

Answer: $682,727.27

Explanation:

Sales price is given as $36.80 per pair and variable costs are $27.60 per pair.

Break Even Point in dollars = Fixed Cost / Contribution margin ratio

Fixed costs = Old fixed costs + increase

= 232,500 + 143,000

= $375,500

Contribution margin = Selling price - Variable cost

Variable costs are to reduce by 40%:

= 36.80 - (27.60 * (1 - 40%))

= $20.24

Contribution margin ratio = Contribution margin / Selling price

=  20.24 / 36.80

= 55%

Break Even Point in dollars = 375,500 / 55%

= $682,727.27