Catered Inc. produces cutlery sets out of high quality wood and steel. The companys contribution format income statement for the most recent year is given below:

	Total	Per Unit	% of sales
Sales (30,000 units)	$1,500,000	$50		100%
Variable expenses	$900,000	$30		?
Contribution margin	$600,000	$20		?
Fixed Assets	$450,000
Net income	$150,000

Management is anxious to increase the companys profit and has asked you to conduct an analysis of a number of items as stated below:

1. Compute the companys CM ratio and expense ratio
2. Compute the companys breakeven point in both units and sales dollar. Use the equation method.
3. Compute the company margin of safety in both dollars and percentage
4. If sales increase by $500,000 next year. If its cost behavior patterns remained unchanged, by how much will the companys operating income increases? Use the CM ratio to compute your answer
5. Refer to original data. Assume that next year management wants the company to earn a profit of $250,000. How many units will have to be sold to meet the target profit? Compute using both the equation and formula method.

6. In an effort to increase sale and profit, management decided to increase variable cost by $5 per unit but will eliminate one quality inspector who is paid a salary of $45,000 per year. The sale manager estimates that the annual sales (in units) will increase by at least 30%.

1. Based on the above, prepare a projected contribution format income statement for next year. Show data on the total, per unit and on percentage basis.
2. Compute the companys new break even point for both in units and dollar of sales.