Prepare a contribution margin income statement

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Reference no: EM132216351

Question - Thornton Company currently produces and sells 7,200 units annually of a product that has a variable cost of $8 per unit and annual fixed costs of $340,600. The company currently earns a $77,000 annual profit. Assume that Thornton has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $6 per unit. The investment would cause fixed costs to increase by $10,200 because of additional depreciation cost.

A) Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). Sale Price per Unit:

B) Prepare a contribution margin income statement, assuming that Thornton invests in the new production equipment.

Reference no: EM132216351

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