Problem: Jetson Co. sold 20,000 units of its only product and incurred a $ 50,000 loss (intoning taxes) for the current year as shown here. During a planning session for year 2012's activities, the production manager's notes that variable cost can be reduced 50% by installing a machine that automates several operations. To obtain these saving, the company must increase its annual fixed costs by $150,000. The maximum output capacity of the company is 40,000 units per year.
JETSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31, 2011
|
Sales
|
$750,000
|
|
Variable costs
|
600,000
|
|
Contribution margin
|
150,000
|
|
Fixed costs
|
200,000
|
|
Net loss
|
$(50,000)
|
Required:
1. Compute the break-even point in dollar sales for year 2011.