Question

g Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (10,400 units at $280 each) $ 2,912,000 Variable costs (10,400 units at $210 each) 2,184,000 Contribution margin 728,000 Fixed costs 567,000 Pretax income $ 161,000 Assume the company is considering investing in a new machine that will increase its fixed costs by $44,500 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:

Forecasted contribution margin income statement for 2020

Sales (10,400 units at $280 each)                   $ 2,912,000

Variable costs (10,400 units at $202 each)   ($ 2,100,800)

Contribution margin                                              $ 811,200

Fixed costs ($567,000 + $44,500)                    ($ 611,500)

Pretax Income                                                      $199,700

Explanation:

Adjust the 2019 Contribution Income Statement by :

1. Decreasing variable costs by $8 per unit and,
2. Increasing Fixed cost by $44,500