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PB5.
LO 3.2Wellington, Inc., reports the following contribution margin income statement for the month of May. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $10 but will increase fixed costs by 20%. Prepare a projected contribution margin income statement for Wellington, Inc., assuming it purchases the new equipment. Assume sales level remains unchanged.

Respuesta :

Answer:

                                              WELLINGTON, INC.

                   Projected Contribution Margin Income Statement

                             for Year Ended December 31, 2020

                                                                                                $

Sales(800 units at $225 per unit)                                   180,000

Variable costs (800 units at $110 per unit)                      88,000

Contriution Margin                                                            92,000

Fixed Cost (1.2*35,000)                                                     42,000

Net Income (Loss)                                                             50,000

Explanation:

Variable cost =$120-$10=$110

Fixed cost increase by 20%=1.2*$35,000.

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