Prepare a forecasted contribution margin income

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Jetson Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2012 activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $150,000. The maximum output capacity of the company is 40,000 units per year.Contribution Margin Income StatementFor Year Ended December 31, 2011Sales 750000 Variable costs 600000 Contribution margin 150000 Fixed costs 200000 Net loss (50000).

1.Prepare a forecasted contribution margin income statement for 2012 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold will not change, and no income taxes will be due. 2.Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume an income tax rate of 30%

Reference no: EM13320261

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