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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.

a. Prepare the following:

i. Contribution margin income statement
ii. Income statement

b. 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.

Accounting Basics, Accounting

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