Chapter 4 Question BigHeat (Big) is a locally owned business that sells and installs garage heating units. It purchases its products from a reputable manufacturer and sells them at the retail level. Big sells their heaters, including installation, on average, for $1,800 each. The average cost from the manufacturer is $1,200 each. Big pays their salespeople a sales commission of 10% of monthly sales revenues. Advertising costs per month are $20,000 and the monthly admin salaries are $75,000. In January, Big sold 2,500 heating units. Their corporate income tax rate is 20%. REQUIRED: 1. For the month of January prepare a contribution format income statement. Include a column for per unit amounts and percentage of sales as appropriate. (9 Marks) 2. Calculate the following for January: (5 Marks) i breakeven point in sales revenue using the contribution margin ratio ii margin of safety in units iii operating leverage 3. If the target net income is $850,000 for next month, how many heating units would have to be sold? (3 Marks) 4. Despite the pandemic, the sales manager is convinced that if all the following changes are implemented next month, unit sales will double (refer to the original data): decrease the unit selling price by $200. increase the monthly admin salaries by 100% increase the advertising budget by $6,000 per month successfully negotiates a 15% decrease in the cost of the heating units increase the sales commission to 20% Calculate the total impact on operating income of making all the above changes (show all calculations clearly or no marks will be awarded) (7 marks) Based on your calculations should management make this change? (1 mark)