CVP computations. Garrett Manufacturing sold 410,000 units of its product for $68 per unit in 2017. Variable cost per unit is $60, and total fixed costs are $1,640,000.

Required:

1. Calculate (a) contribution margin and (b) operating income.

2. Garretts current manufacturing process is labor intensive. Kate Schoenen, Garretts production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $5,330,000. The variable costs are expected to decrease to $54 per unit. Garrett expects to maintain the same sales volume and selling price next year. How would acceptance of Schoenens proposal affect your answers to (a) and (b) in requirement 1?

3. Should Garrett accept Schoenens proposal? Explain.