Denver Doors produces wooden doors, which it sells for $50 per unit. The company's forecast income statement for October 20Y9 is as follows:

Denver Doors: income statement for October 20Y9 $ Sales revenue (2,000 doors @ $50 per unit) 100,000 Variable cost of goods sold (2,000 doors @ $20 per unit) (40,000) Gross margin 60,000 Administrative salaries (15,000) Shipping and handling expense (2,000 doors @ $1 per unit) (2,000) Variable selling overheads ($4 for each door sold) (8,000) Fixed advertising expenses (20,000) Depreciation of administrative office furniture (5,000) Net income 10,000

Required: a) make revised income statement for October 20Y9 using the contribution margin format (hint: you will need to classify costs according to whether they are variable or fixed in nature).

b) Using your answer from part a), calculate Denver's operating leverage. Determine the amount of net income that Denver would earn during October 20Y9 if sales revenue increases by 10%

d) Using the question data and your own calculations, calculate the company's Unit Contribution Margin.

e) Calculate the company's Break-even units and Break-even Dollars.

f) How many units must be sold during October 20Y9 to earn a net income of $25,000?

Elway Company and Manning Company operate in the same market. The following budgeted income statements illustrate the cost structures of each company for October 20Y9:

Elway Manning

$ $

Sales revenue $12,000 $12,000

Less variable costs 3,000 5,000

Contribution margin 9,000 7,000

Less fixed costs 3,000 1,000

Net income 6,000 6,000

Number of customers 100 100

Sales price per customer $120 $120

Required: If Manning lowers its price to $70 per customer, assume that all of Elway's existing customers now purchase Manning's product. Redraft Manning's income statement for October based on a sales price of $70 per unit and 200 customers.