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.
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