Accounting 2 Student Learning Outcomes In this discussion board assignment, we focus on two student learning outcomes for o

Accounting 2 Student Learning Outcomes

In this discussion board assignment, we focus on two student learning outcomes for our class:

  • Prepare and analyze a contribution margin income statement and explain related items.
  • Prepare analysis related to management decisions involving capital expenditures and apply and evaluate various methods used in making these decisions.

The Facts

During the last two years, a small manufacturing business has suffered erratic sales due to the ongoing COVID pandemic and supply chain issues. As a result, the business is facing financial difficulties. The contribution format income statement for the month ended November 30, 2021 is:

Contribution Margin format Income Statement
Sales (19,500 units x $30 per unit) $585,000
Variable Expenses 409,500
Contribution Margin $175,500
Fixed Expenses 180,000
Net Operating Loss $(4,500)

The Issue

The CEO of the business learned automating the manufacturing process could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $72,000 each month. The CEO ask you, as a managerial accountant, if you would recommend that the company automate its operations.

The Assignment

In order to respond to the CEO’s question, compute:

  • The current contribution margin ratio and break-even point based on the November 2021 contribution margin format income statement.
  • The new contribution margin ratio and break -even point if the company automates its manufacturing process.
  • Make a recommendation regarding automating the manufacturing process  to the CEO. Support your recommendation with at least 2 data points from your analysis.

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