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I do not understand how the values of yr 1-18,540 yr2 61,108 yr3 95,723 yr4 48,622 in the contribution of the parts sales have come from. would you please explain the step to have gotten the same with reason.
Currently they are charing $200 and making a contribution of $40. Therefore the cost must be $160.
They are going to increase the price to $280 per unit, and therefore the contribution will increase to 280 – 160 = $120 per unit.
The US inflation rate is 3%, and therefore the contribution at time 1 is 150 units x $120 x 1.03 = $18,540. At time 2 it is 480 x $120 x 1.03^2 = $61,108, and so on.