As a world-leading manufacturer of electroacoustic products, Merry Electronics Group was established in 1975, and specializes in the design and manufacture of earphones, headsets, speakers, microphones, batteries, and assistive listening devices (ALD) for mobile communication, multimedia and entertainment, accessory, smart homes, medical and healthcare.

Details of manufacturing and Financial Report ends of the year 2020, 2019 are as follows:

STATEMENTSOFCOMPREHENSIVEINCOME	YearsendedDecember31,
	2020	2019
Items	AMOUNT	AMOUNT
Sales revenue	34,444,819	36,397,793
Operating costs	(30,126,271)	(31,357,874)
Net operating margin	4,318,548	5,039,919
Operating expenses
Selling expenses	(344,395)	(377,385)
General and administrative expenses	(1,128,600)	(1,101,667)
Research and development expenses	(1,704,636)	(1,305,385)
Expected credit impairment loss	(175)	(20,130)
Total operating expenses	(3,177,806)	(2,804,567)
Operating profit	1,140,742	2,235,352
Non-operating income and expenses
Interest income	43,912	75,012
Other income	279,246	308,251
Other gains and losses	(182,510)	44,344
Finance costs	(60,817)	(81,319)
Share of profit of associates and joint ventures accounted for under equity method	482,132	664,557
Total non-operating income and expenses	561,963	1,010,845
Profit before income tax	1,702,705	3,246,197
Income tax expense	(383,305)	(715,051)
Profit for the year	1,319,400	2,531,146

Notes:

(27) Expensesbynature Year End December 31,
	2020	2019
Employee benefit expense	3,306,368	2,729,703
Depreciation charge - property, plant
and equipment	350,587	206,463
Depreciation charge - right-of-use assets	126,399	73,295
Amortisation charge	132,861	132,426
	3,916,215	3,141,887
directors on June 19, 2020, there were 5 non-employee directors until December 31, 2020. For the year ended December 31, 2019, there were 5 non-employee directors.
(28) Employeebenefitexpense YearsendedDecember31,	2020	2019
Wages and salaries	2,871,775	2,206,825
Share-based payments	94,362	52,158
Labour and health insurance fees	62,096	59,380
Pension costs	100,984	131,464
Directors' remuneration	26,380	135,949
Other personnel expenses	150,771	143,927
	3,306,368	2,729,703
Note: For the years ended December 31, 2020 and 2019, the Group has 10,207 and 11,764 employees, respectively. For the year ended December 31, 2020, there was 5 non-employee directors. After reelecting directors on June 19, 2019, there was 5 non-employee directors until December 31, 2020. For the year ended December 31, 2019, there was 5 non-employee directors.

The cost of inventories recognized as expense for the year:	Years ended December 31,
	2020	2019
Cost of goods sold (Gain on reversal of) loss on slow-moving	30,159,093	31,215,308
inventories and decline in market value	(69,365)	51,742
Loss on scrapping inventory	36,338	90,904
Loss (gain) on physical inventory	205	(80)
Total	30,126,271	31,357,874
The Group reversed a previous inventory write-down because of the sale of certain written-down inventories by the Group for the year ended December 31, 2020.

Financial analysis	Merry Electronic Group	Year
	Item	2020	2019
Financial structure(%)	Debts Ratio	64.07	49.94
	Long-term Fund to Property, Plant and Equipment	378.81	729.4
Liquidity(%)	Current Ratio	112.81	167.1
	Quick Ratio	93.24	143.42
	Times interest earned	32.95	42.04
Operating ability	Average Collection Turnover (Times)	3.78	5.1
	Average days of collection	96.56	71.56
	Average Inventory Turnover (Times)	9.71	11.39
	Average Payables Turnover (Times)	3	3.31
	Average days of sales	37.59	32.04
	Property, Plant and Equipment Turnover (Times)	11.52	17.04
	Total Assets Turnover (Times)	1.15	1.29
Profitability	Return on assets ratio (%	5.42	11.02
	Return on equity (%)	10.72	22.24
	Pre-tax income to paid-in capital ratio (%) (Note )	81.34	155.57
	Net profit ratio (%)	3.83	6.95
	Earnings Per Share (NT$)	6.39	12.51
Cash flows	Cash flow ratio (%)	-16.25	46.25
	Cash flow adequacy ratio (%)	87.6	152.97
	Cash reinvestment ratio (%)	-38.23	16.47
Leverage	Operating leverage	1.53	1.18
	Financial leverage	1.05	1.04

Leverage:

(1) Operating leverage = (net operating revenues - current operating cost and expense)/operating

profit.

(2) Financial leverage = operating profit/(operating profit - interest expense).

Requires:

1.Provide your assessment of its product/service and cost structure.

2. Perform a cost-volume-profit analysis, which includes:

(1) Calculate the contribution margin percentage, breakeven revenue for year 2020.

correct or not?

Operating leverage = (net operating revenues - current operating cost and expense)/operating

profit.

1.53=(34,444,819-current operating cost and expense)/1,140,742

current operating cost and expense=(34,444,819-1,140,742*1.53)=32,699,484

contribution margin percentage=(32,699,484/34,444,819)=94.93%

breakeven revenue=fixed operating cost and expense/contribution margin percentage

=1,745,335/94.93%=1,838,549

(2) The company estimates that sale to increase 20% in year 2021. If Income tax rate for 2021 is 20% and cost structure remains constant. How much should the net income after tax become in year 2021?

(3) others, if any.