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Math Help - Please help me with my accounting homework.

  1. #1
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    Please help me with my accounting homework.

    Hello.

    I'm having a hard time with my accounting homework, I appreciate any help.

    this is what my homework says

    Astro Co. sold 20,750 units of its only product and incurred a $62,500 loss (ignoring taxes) for the current year 2008. During a planning session for year 2009ís 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 $220,000. The maximum output capacity of the company is 41,500 units per year.

    then I'm asked a serie of question, I've answered most of them, except these two

    Compute the sales level required in both dollars and units to earn $126,350 of after-tax income in 2009 with the machine installed and no change in unit sales price. Assume that the income tax rate is 30%.

    I'm told to use these equations

    dollar sales at target after tax income = fixed costs +pretax income all this divided by contribution margin ratio

    and to calculate unit sales at target after tax income= fixed costs + pretax income all this divided by contribution margin per unit.

    I was able to figure out the contribution margin, it equals 180500, fixed costs are 490000 and pretax income is 180500, but I don't know nothing about contribution margin ratio nor contribution margin per unit since I haven't been able to figure out how many units should be sold in order to make $126,350


    thank you for any help.
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  2. #2
    Junior Member
    Joined
    Oct 2006
    From
    canada
    Posts
    68
    forgot to paste this data concerning that problem



    ASTRO COMPANY
    Contribution Margin Income Statement
    For Year Ended December 31, 2008

    sales 1,037,500
    variable costs 830,000
    contribution margin 207,500
    fixed costs, 270,000
    net loss 62,500
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