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

Step-by-step 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