Bailey Manufacturing sold 450,000 units of its product for $68 per unit in 2020. Variable cost per unit is $58, and total fixed costs are $1,800,000 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 4,500,000 used to calculate the operating income. Total fixed costs : The contribution margin is 5 (b) Determine the formula Contribution margin $ 2,700,000. Contribution margin Operating Income Operating income is Requirement 2. Bailey's current manufacturing process is labor intensive. Kate Wagner, Baley's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $6,750,000. The variable costs are expected to decrease to $40 per unit. Bailey expects to maintain the same sales volume and selling price next year. How would acceptance of Wagner's proposal affect your answers to (a) and (b) in requirement 12 Recalculate (a) and (b) if the proposal is accepted. (a) The contribution margin would be (b) Operating income would change to Requirement 3. Should Bailey accept Wagner's proposal? Explain. Operating income is expected to income alone, Bailey should $ 12,000,000 under Wagner's proposal. $5,850,000 increase by accept the proposal. Based on the operating Clear all Check answe ments g sold 450,000 units of its product for $68 per unit in 2020. Variable cost per unit is $58, and total fixed costs are $1, nts. cul rmu argin ermu n S lley fixe ner' (b) on n omel Question 1, E3-22 (similar to) Part 7 of 8 s expected to By should help. Requirements mould Bailey accept Wagner's proposal? Explain. increase by accept 1. Calculate (a) contribution margin and (b) operating income. 2. Bailey's current manufacturing process is labor intensive. Kate Wagner, Bailey's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $6,750,000. The variable costs are expected to decrease to $40 per unit. Bailey expects to maintain the same sales volume and selling price next year. How would acceptance of Wagner's proposal affect your answers to (a) and (b) in requirement 1? 3. Should Bailey's executives accept Wagner's proposal? Explain. Print the proposal. Done HW Score: 44.2 Points: 0.57 Based on the operating - X osed inv aintain th