Bradjoli Inc. produces a single product. The results of operations for a typical month are as follows:

Sales revenue $540,000 Variable expenses 360,000 Contribution margin 180,000 Fixed costs 100,000 Operating income $ 80,000

The company produced and sold 120,000 kgs of product during the month, and there were no beginning or ending inventories. Bradjoli pays income tax at a rate of 25%.

Required: a) At the typical sales volume, calculate: 3 i) the breakeven point is units sold and in sales dollars. 2 ii) the margin of safety as a percentage. 3 iii) the operating leverage. Using the operating leverage, determine the operating profit that Bradjoli would report if sales were to increase 40%. 4 b) Compute the target sales in units and sales dollars if Bradjoli wants to earn an after-tax profit of $162,000. 1 i) At this sales volume, what is the operating leverage? 1 ii) At this sales volume, determine the operating profit that Bradjoli would report if sales were to increase 40%. 4 c) Using the typical months operating results as the starting point, calculate the breakeven point if Bradjoli plans to invest in automation with a monthly fixed cost of $25,000 and expects this will reduce variable expenses by $0.50 per unit. Do you recommend the company undertake this investment? Why or why not?