Finny Inc's contribution format income statement for the most recent month is given below,

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Sales (55,000 units)

$1,100,000

Variable expenses Contribution margin Fixed expenses

01:21:22

Net operating income

264,000

66,000

$

The Industry in which Finny Inc. operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably m 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:

1. New equipment has come on the market that would allow Finny Inc. to automate a portion of its operations. Variable expenses would be reduced by $6 per unit. However, fixed expenses would increase to a total of $594,000 each month. Prepare two contribution format Income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased.