Appendix Three (Cost-Volume-Profit Analysis) Objective: With the new plant in operation, what would be the production level necessary to maintain Net Operating Income at a level similar to a competitor of BTF. Scenario: CC researched and came up with the contribution margin Income Statement of a competitor, Solarstar Inc. The contribution margin Income Statement is prenared for a cales volume of 40,000 units. Methodology: The consulting group projects that since BTF's plant will be automated, it will increase contribution margin per unit by 50% and fixed expenses by 55%. The increase in contribution margin will be due to production efficiencies which will reduce variable expenses, while total revenue and number of units sold remaining unchanged from the above scenario. Under assumption that the same number of products are manufactured and sold as in the above scenario, the group will develop a new Contribution Margin Income Statement, new breakeven sales in units and calculate the degree of operating leverage. Based on the above calculation, they would advise regarding the risk level of this scenario (high, medium, or low) and provide a rationale for the same