a. Prepare a contribution margin income statement that summarizes the dealerships projected operating income.

b. Calculate the dealerships projected break-even point in terms of total revenue (total revenue will equal the sum of product sales revenue and repair services revenue). Calculate the dealerships margin of safety.

c. Assume that the dealership operates under the projections that were initially outlined with the exception of a change in compensation structure for sales personnel. Brad and Lewis intend to eliminate the base salaries for the dealerships sales personnel and increase their commission to 30% of sales. Prepare a contribution margin statement based upon the modified compensation structure and calculate the companys new break-even point in terms of total revenue.

Financial Projection Assumptions:

Projected number of motorcycles sold per year: 150

Projected number of snowmobiles sold per year: 125

Projected number of ATVs sold per year: 100

Projected average retail price of each motorcycle: $8,000

Projected average retail price of each snowmobile: $6,000

Projected average retail price of each ATV: $5,000

Projected total annual repair service revenue: $70,000

Variable Costs:

Projected average cost of each motorcycle: $4,000

Projected average cost of each snowmobile: $4,500

Projected average cost of each ATV: $3,500

Sales commissions: 20% of retail product sales

Payroll taxes: 12% of sales commissions paid

Supplies: 10% of repair service revenue

Fixed Costs:

Advertising $24,000

Alarm services fee $1,000

Bank fees $2,400

Cleaning service $3,200

Depreciation $6,000

Dues and subscriptions $1,000

Store manager salary $40,000

Sales personnel base salaries $24,000

Mechanic's annual salary $40,000

Payroll taxes 12% of payroll

Insurance $4,000

Miscellaneous $1,000

Legal and professional fees $4,000

Office supplies and postage $2,000

Payroll service fees $2,000

Rent $16,000

Telephone $1,000

Training and education $2,000

Utilities $6,000