ACCT _3500_MI NICASE_3_1 341_Winter 20 23 Dominion Sports, Inc, produces high-quality sports equipment. The company's Racket Division manufactures three tennis racketsthe Standard, the Deluxe, and the Professionalthat are widely used in amateur play. Selected information on the rackets is given below: Standard Deluxe Professional Selling price per racket $40.00 $60.00 $90.00 Variable expenses per racket: Production $22.00 $27.00 $31.50 Selling (5% of the selling price) $2.00 $3.00 $4.50 All sales are made through the company's retail outlets. The Racket Division has the following fixed costs: Per Month Fixed production costs $120,000 Advertising expense 100,000 Administrative salaries 50,000 Total $270,000 Sales, in units, over the past two months have been as follows: Standard Deluxe Professional Total August 2,000 1,000 5,000 8,000 September 8,000 1,000 3,000 12,000 Required: 1. Prepare contribution format income statements for August and September. Use the following headings: [6 Marks] Standard Deluxe Professional Total Amount % Amount % Amount % Amount % Sales Etc. 2. Upon seeing the income statements in ( 1) above, the president stated, \"I can't believe this! We sold 50% more rackets in September than in August, yet prots went down. It's obvious that costs are out of control in that division." What other explanation can you give for the drop in net operating income? [4 Marks] 3. Compute the Racket Division's break-even point in dollar sales and Margin of Safety for August. [2 Marks] 4. Compute the number of units Dominion Sports need to sell to break even of each product. [4 Marks] 5. The Marketing department believes that by increasing the advertising expense to $150,000 in September, it can increase sales of each product by 15%, would you suggest this increase in advertising expense, and why? [4 Marks] 6. Assume that sales of the Stande racket increase by $20,000. What would be the effect on net operating income? What would be the effect if Professional racket sales increased by $20,000? [5 Marks]