6 q's in the colored boxes.

4) Break Even Point and Margin of Safety 4a ADC's management has a few important strategy decisions to make. ADC wants to determine the break-even point and margin of safety Current Yr. Next Year Actual Budget $ 2,589.000 S 2,796,300 $ 1,458,000S 1528.000 $ 1,131.000 $ 1.268,300 Income Statement Revenue Cost of Goods Sold Gross Profit Administrative Expenses: Rent Expense Utilities Expense Administrative Salaries Office Expense Sales Commissions Expense Depreciation Expense Total Administrative Expenses Net Income $ $ $ $ $ S IS 45,000 85,600 375.000 125,900 258,900 52.000 942,300 188,700 S $ $ $ $ $ $ S0000 90,460 410,000 130,200 270,000 55.000 1,005,660 262640 Management estimates that cost of goods sold consists of 70% variable costs and 30% fixed costs Except for Sales Commissions Expense, all administrative costs are forced costs. Sales Commissions expense is a variable cost 45 Translate the above traditional format income statements into Cost-Volume-Profit format income statements. Translate both the current Year and Next Year Budget Income Statements 4 What are the contribution margin percentages for the current year and for next year's budget? 4d Calculate the sale dollar break even point for the current year and for next year's budget? 4e Calculate the margin of safety percentage for the current year and for next year's budget. 4 ADC is considering the purchase of a drum shell forming machine. Such machines bend thin layers of wood into perfectly round drum shells. Below are expected changes to foed and variable costs the drum-forming machine is purchased Expected changes Increase in Sales Decrease in variable costs Increase in foued costs $ $ $ 150,000 75,000) 275,000 Adjust the Next Year Budget numbers to include the expected sales and cost changes and sakulate a new break even point for the Next Year Budget According to the new break even point of the machine is purchased, is purchasing a drum shell forming machine a good idea? Why? Is there a downside to purchasing the machine