Wilton Company is analyzing two alternative methods of producing its product.The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production,but fixed costs would increase.Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed.(a)Compute the break-even point in units and dollars for both alternatives.(b)Prepare a forecasted income statement for both alternatives assuming that 30,000 units will be sold.The statements should report sales,total variable costs,contribution margin,fixed costs,income before taxes,income taxes,and net income.Below the income statement,compute the degree of operating leverage.Which alternative would you recommend and why?
Definitions:
Q46: The relevant range of operations includes extremely
Q47: Companies that use a series of repetitive
Q67: Which of the following is never included
Q78: Based on predicted production of 25,000 units,Best
Q86: A company is looking into two alternative
Q96: A cost variance equals the sum of
Q100: Raw materials that become part of a
Q106: The contribution margin per unit is the
Q126: Which of the following budgets is not
Q155: Process cost accounting systems are commonly used