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E-Z Seats manufactures swivel seats for customized vans. It currently manufactures 10,900 seats per year, which it sells for $500 per seat. It incurs variable

E-Z Seats manufactures swivel seats for customized vans. It currently manufactures 10,900 seats per year, which it sells for $500 per seat. It incurs variable costs of $240 per seat and fixed costs of $2,267,200. It is considering automating the upholstery process, which is now largely manual. It estimates that if it does so, its fixed costs will be $3,825,900, and its variable costs will decline to $110 per seat. Answer the following questions.

Prepare a CVP income statement based on current activity.

E-Z Seats CVP Income Statement
Net Income/(Loss)Gross ProfitVariable CostsFixed CostsContribution MarginSales $
Variable CostsContribution MarginGross ProfitFixed CostsSalesNet Income/(Loss)
Net Income/(Loss)Fixed CostsVariable CostsContribution MarginGross ProfitSales
Variable CostsNet Income/(Loss)Fixed CostsGross ProfitSalesContribution Margin
Variable CostsFixed CostsNet Income/(Loss)Gross ProfitContribution MarginSales

$

Compute contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage based on current activity. (Round margin of safety ratio and degree of operating leverage to 1 decimal place, e.g. 2.5% or 2.5 and break-even point in dollars to 0 decimal places, e.g. 2,520.)

Contribution margin ratio %
Break-even point in dollars $
Margin of safety ratio %
Degree of operating leverage

Prepare a CVP income statement assuming that the company invests in the automated upholstery system.

E-Z Seats CVP Income Statement
Contribution MarginGross ProfitVariable CostsFixed CostsSalesNet Income/(Loss) $
Fixed CostsGross ProfitSalesContribution MarginVariable CostsNet Income/(Loss)
Contribution MarginSalesGross ProfitNet Income/(Loss)Variable CostsFixed Costs
Fixed CostsNet Income/(Loss)Contribution MarginVariable CostsGross ProfitSales
Fixed CostsGross ProfitContribution MarginNet Income/(Loss)SalesVariable Costs

$

Compute contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage assuming the new upholstery system is implemented. (Round degree of operating leverage to 1 decimal place, e.g. 2.5.)

Contribution margin ratio %
Break-even point in dollars $
Margin of safety ratio %
Degree of operating leverage

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