Question - Jetson Co. sold 20,300 units of its only product and incurred a $78,798 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2012's 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 $153,000. The maximum output capacity of the company is 40,000 units per year.
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JETSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31, 2011
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Sales
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$767,340
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Variable costs
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537,138
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Contribution margin
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230,202
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Fixed costs
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309,000
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Net loss
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$(78,798)
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Compute the predicted break-even point in dollar sales for year 2012 assuming the machine is installed and there is no change in the unit sales price.