Bailey Manufacturing sold 435,000 units of its product for $60 per unit in 2017. Variable cost per unit is $50, and total fixed costs are $1,740,000. Read the requirements Requirement 1. Calculate (a) contribution margin and (b) operating income. (a) Determine the formula used to calculate the contribution margin. Total sales - Total variable costs = Contribution margin The contribution margin is $ 4,350,000 (b) Determine the formula used to calculate the operating income Contribution margin- Total fixed costs Operating Income Operating income is $ 2,610,000 Requirement 2. Bailey's current manufacturing process is labor intensive. Kate Fischer, Bailey's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $5,220,000 The variable costs are expected to decrease to $46 per unit. Bailey expects to maintain the same sales volume and selling price next year. How would acceptance of Fischer's proposal affect your answers to (a) and (b) in requirement 1? Recalculate (a) and (b) if the proposal is accepted. (a) The contribution margin would be S under Fischer's proposal. Requirements 1. Calculate (a) contribution margin and (b) operating income. 2. Bailey's current manufacturing process is labor intensive. Kate Fischer, Bailey's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $5,220,000. The variable costs are expected to decrease to $46 per unit. Bailey expects to maintain the same sales volume and selling price next year. How would acceptance of Fischer's proposal affect your answers to (a) and (b) in requirement 1? 3. Should Bailey accept Fischer's proposal? Explain. Enter any number in the edit fields and then click Check Answer 3 parts remaining Clear All Print Done