Calculate the break-even point and margin of safety ratio, and prepare a CVP income statement before and after changes in the business environment. P6.61B (L01,2,3,4) Axelle Corporation has collected the following information after its first year of operations. Net sales were $2 million on 100,000 units, selling expenses were $400,000 ( 30% variable and 705 fixed), direct materials were $600,000, direct labour was $340,000, administrative expenses were $500,000(30% variable and 70% fixed), and manufacturing overhead was $480,000 ( 20% variable and 8096 fixed). Top managers have asked you to do a CVP analysis so that they can make plans for the coming year. They have projected that sales will increase by 20% next year. Assume no change in the price of the units. Instruetions a. Calculate (1) the contribution margin for the first year and the projected year, and (2) the fixed costs for the fint year. (Assume that fixed costs will remain the same in the projected year.) A. Contribution maryin (tirst year) =$694,000 b. Calculate the break-evea point in units and sales dollars. c. The company has a target operating income of $374,000. Calculate the required sales amount in dollars for the company to meet its target. d. Aerume the company meets its target operating income number. Calculate by what percentage its sales could fill before it operates at a loss. That is, what is ita margin of safety ratio? e. The company is considering buying equipment that would reduce its direct labour costs by $140,000 and would change its manaficturing overhead costs to 10% variable and 90% fixed. (Asume the total manufacturing overhead cost is 5480,000 , as above. Assume no change in the volume or selling price of the unita.) It is also considering switching to a pure commission basis for its sales ataff. This would clange selling expenses to 80% variable and 204 fixed. (Aasume the total selling expenses are 4400,000 , as above) Calculate (1) the eontribution margin and (2) the contribution margin ratio, and (3) recaleulate the break-even point in sales dollars. Comment on the effect each of management's proposed changes has on the break even point