Question

[The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (11,300 units at $175 each) $ 1,977,500 Variable costs (11,300 units at $140 each) 1,582,000 Contribution margin $ 395,500 Fixed costs 315,000 Pretax income $ 80,500 Assume the company is considering investing in a new machine that will increase its fixed costs by $37,000 per year and decrease its variable costs by $8 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.

Answer 1

Answer:

Pretax income= $133,900

Explanation:

Giving the following information:

Selling price= $175

New unitary variable cost= $132

New fixed costs= 315,000 + 37,000= 352,000

Now, we can determine the new operating income:

Sales= 11,300*175= 1,977,500

Total variable cost= 11,300*132= (1,491,600)

Total contribution margin= 485,900

Fixed costs= (352,000)

Pretax income= 133,900