ADI produces memory enhancement kits for NUY Microwaves. Sales of the kits have been very erratic, with some months showing a profit and some months showing a loss. Currently, the ADI produces as many units as are required for sales. The ADI's contribution margin income statement for the most recent month is given below: Sales (13,500 units at $20 per unit) $270,000 Variable expenses (all production related) 189,000 Contribution margin 81,000 Fixed expenses (all production related) 90,000 Net operating loss $ (9,000) REQUIRED: 1. Compute the ADIs CM ratio and its break-even point in units only. 2. Refer to the original data. By automating, ADI could slash its unit variable cost in half. However, fixed costs would increase by $118,000 per month. (i) At what volume level would the division be indifferent between automation and the current non-automated process? That is, what is the ADI rule for automation in terms of volume? (ii) Based on the decision rule above, would you recommend that the ADI automate its operations if volume continues at the current level? 8 (iii) Assume for this part that the selling price per kit is $24 per unit. All other data are the same as stated in the problem. What is the Operating Leverage Ratio (OLR)? If sales decline by 10%, what does the OLR predict will be the effect on operating income? (iv) Assume just for this part only that production of memory kits is increased to 15000 units. However, sales are still 13,500 units. All other data are the same as stated in the problem. What would be the ADIs reported income under Absorption Costing?