Problem: Success Manufacturing sold 540,000 units of its product for $72 per unit in 2011. Variable cost per unit is $54 and total fixed costs are $2,140,000.
Q1. Prepare a) contribution margin income statement, and b) an income statement.
Q2. If a new piece of machinery increases the fixed costs to $6,330,000 annually, but reduces the variable costs to $48 per unit, should the new piece of equipment be purchased? Why or why not? Show your work by preparing a new contribution margin income statement and income statement.