A company started as a small grain milling operation in $1999.$ The company now

processes, on average, $127$ million pounds of wheat each year. Milled wheat flour is

sold in $50$ pound sacks to retailers. Assume $2,500,000$ sacks were sold for $$42\mathrm{.}50$ each

last year. Variable costs were $$22\mathrm{.}25$ per pack and fixed costs totaled $$31,500,000.$ The

contribution income statement for $2022$ is shown below:

In general, explain the differences between a contribution and a functional income

statement.

For the company in this example, determine last year's operating leverage.

For the company in this example, calculate the percentage change in profits if sales

decrease by $10\%.$

Management of the company in this example is considering the purchase of several

new pieces of packaging equipment. This will increase annual fixed costs to $$45,725,500$

and reduce variable costs to $$16\mathrm{.}35$ per sack. Calculate the effect of this acquisition on

operating leverage and explain any change