Due to the labor shortage during the pandemic, many restaurants substitute a robotic machine for hourly

wage workers. Morton Restaurants contribution format income statement for last month is given below:

Sales units $ per unit $

Variable expenses

Contribution margin

Fixed expenses

Net operating income           $

The industry in which Morton Company operates is quite sensitive to cyclical movements in the

economy. Thus, profits vary considerably from year to year according to general economic conditions.

The company has a large amount of unused capacity and is studying ways of improving profits.

Required:

New robot machines has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses of labor wages would be reduced by $ per unit. However, fixed expenses to purchases these machines would increase to a total of $ each month from $ Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased.

Refer to the income statements in For the present operations and the proposed new operations, compute a the breakeven point in dollar sales, and b the margin of safety in dollars and the margin of safety percentage.

Refer to the original data. Rather than purchase new machines, the marketing manager argues that the companys marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by without any change in selling price; the companys new monthly fixed expenses would be $; and its net operating income would increase by Compute the companys breakeven point in dollar sales under the new marketing strategy.

Refer again to the data in Assume that enough funds are available to make the purchase. Because the industry is sensitive to cyclical movements in the economy, analyze whether to purchase the new machines is a good decision in good times or in bad times. You may use two scenarios as comparisons to support your analysis: when sales increase to units good economy and when sales decreases to units bad economy