Davidson Manufacturing sold 435,000 units of its product for $74 per unit in 2020. Variable cost per unit is $62, and total fixed costs are $1.940,000 Read the requirements Requirement 1. Calculate (a) contribution margin and (b) operating income. (a) Determine the formula used to calculate the contribution margin The contribution margin is Contribution margin (b) Determine the formula used to calculate the operating income Operating income is Operating Income Requirement 2. Davidson's current manufacturing process is labor intensive. Kate Schmidt, Davidson's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual foxed costs to $5,655,000. The variable costs are expected to decrease to $54 per unit Davidson expects to maintain the same sales volume and selling price next year. How would acceptance of Schmidt's proposal affect your answers to (a) and (b) in requirement 17 Recalculate (a) and (b) if the proposal is accepted (a) The contribution margin would be (b) Operating income would change to under Schmidt's proposal Requirement 3. Should Davidson accept Schmidt's proposal? Explain Operating income is expected to income alone, Davidson should by the proposal Based on the operating Manangement would consider other factors before making the final decision. It is likely that product Quality proposal Improve as a result of using state-of-the-art equipment. However, the the company's fixed cost. This wil the company's operating leverage and risk Next