Florida Berry Basket harvests early-season strawberries for shipment throughout the eastern United States in March. The strawberry farm is maintained by a permanent staff of 10 employees and seasonal workers who pick and pack the strawberries. The strawberries are sold in crates containing 100 individually packaged one-quart containers. Affixed to each one-quart container is the distrinctive Florida Berry Basket logo inviting buyers to "Enjoy the berry best strawberries in the world!" The selling price is $100 per crate, variable costs are $85 per crate, and fixed costs are $275,000 per year. In the year 2013, Florida Berry Basket sold 50,000 crates.

Required

a. Prepare a contribution income statement for the year ended December 31, 2013

b. Determine the company's 2013 operating leverage.

c. Calculate the percentage change in profits if sales decrease by 10 percent.

d. Management is considering the purchase of several berry-picking machines. This will increase annual fixed costs to $375,000 and reduce variable costs to $81.50 per crate. Calculate the effect of this acquisistion on operating leverage and explain any change.