Finny Inc's contribution formst income statement for the mast recent month is glven below.

The Industry in which Finny lnc$.$ operetes is quite senaltwe to cyclical movements in the economy. Thus, profits viry conaidersbly from

year to year occording to general economic condtiona. The compeny hea a large amount of unused cspocity snd la studying ways of

improving profits.

Requlred:

New equipment has come on the market that woud sillow Finny linc, to outamate a portion of its operstona. Voriable expense:

would be reduced by $$5$ per unlt. However, fixed expenses would Increase to s total of $$540,000$ esch month. Prepsre two

contribution formet income ststements: one showing present operations, snd ane showing how operstions would spese if the new

equipment were purchssed.

Q Answer is not complete.

$2$ Reier to the Income statements in Requirement $(1)$ above. For both present operstons and the proposed new operations, Compute:

a$.$ The degree of opersting leversge.

Answer is complete but not entirely correct.

b$.$ The break$-$even point in dolars.

Answer is complete but not entirely correct.

c$.$ The margin of safety in both dolar and percentoge term:

Answer is complete but not entirely correct.

Refier sgsin to the dats in Requlrement $(1)$ sbove. As a mansger, what foctor would be porsmount in your mind in deciding whether

to purchase the new equlament? $($Asaume that ample funds are ovolable to mbke the purchese$)$

Cyclical movements in the econamy $o.$

Resenves snd surplus of the compony

Performence of peers in the indatry

Stock level meintained

Refier to the originsl dsta. Rather than purchsse new equipment, the marketing mansger orgue: that the compony's marketing

suggests that so eapeople be psid fued salaries and that the company Invest hesvily in solvertiaing. The morketing mansger elsims

expenses would be $$295,000$; snd its net opersting income would incresse by $25\%.$ Compute the breakeven point in dolar sales for

the compony under the new morketing strategy. Do you sgree with the marketing msnoger's proposo?

Answer is complete but not entirely correct.