Walton company currently produces and sells 6,800 units annually of a product that has a variable cost of $18 per unit and annual fixed costs of $174,400. the company currently earns a $84,000 annual profit. assume that walton has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $16 per unit. the investment would cause fixed costs to increase by $9,800 because of additional depreciation cost. required use the equation method to determine the sales price per unit under existing conditions (current equipment is used). prepare a contribution margin income statement, assuming that walton invests in the new production equipment.

The sales price per unit under existing conditions : Unit $ 56,00

With this price the company keeps the same profit margin as before and without improvements.

Prepare a contribution margin income statement:

Contribution Margin with the improvements and under the actual price of Unit $ 56,00

$ 272,000Contributing Margin

$ 87,800Segment Margin

Explanation:

The original situation before implementing the improvements it's:

Quantity  Unit  TOTAL    Income Statement

6,800      $ 56,00$ 380,800Total Net Sales

               $ 18,00-$ 122,400Variable Cost

                         $ 258,400Contributing Margin

                         -$ 174,400Anual Fixed Costs

                               $ 84,000Segment Margin

If the improvements are implemented:

Quantity  Unit  TOTAL    Income Statement

6,800      $ 56,00  $ 380,800Total Net Sales

               $ 16,00-$ 108,800Variable Cost

                           $ 272,000Contributing Margin

                         -$ 184,200Anual Fixed Costs

                         $ 87,800Segment Margin

answerimplicit;