Frieden Company's contribution format income statement for last month is shown below: Sales (30,000 units) Variable expenses $1,050,000 630,000 Contribution margin Fixed expenses 420,000 378,000 Operating income $ 42,000 Competition is intense, and Frieden Company's profits vary considerably from one year to the next. Management is exploring opportunities to increase profitability. Required: 1. Frieden's management is considering a major upgrade to the manufacturing equipment, which would result in fixed expenses increasing by $420,000 per month. However, variable expenses would decrease by $14 per unit. Selling price would not change. Prepare two contribution format income statements, one showing current operations and one showing how operations would appear if the upgrade is completed. Show an Amount column, a Per Unit column, and a Percentage column on each statement. Answer is complete but not entirely correct. FRIEDEN COMPANY Contribution Margin Income Statement Present Amount Per Unit % Proposed Per Unit Amount % Answer is complete but not entirely correct. Proposed Per Unit % FRIEDEN COMPANY Contribution Margin Income Statement Present Amount Per Unit % Amount $ 1,050,000 $ 25 100 $ 1,050,000 630,000 15 60 210,000 420,000 $ 10 40 840,000 378,000 798,000 $ 42,000 $ 42,000 $ 25 0 Sales Variable expenses Contribution margin Fixed expenses Operating income 5 0 X 0 $ 20 2. Refer to the income statements in requirement 1 above. For both current operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollars, and (c) the margin of safety in both dollar and percentage terms. Answer is complete and correct. Present Proposed Degree of operating leverage 10 20 Break-even point in dollars $ 945,000 $ 997,500 Marnin of cofstu in dollare 52 5nn a b. 4 105 nnn Answer is complete and correct. a. b. Degree of operating leverage Break-even point in dollars Margin of safety in dollars Margin of safety in percentage Present 10 $ 945,000 $ 105,000 10 % Proposed 20 $ 997,500 $ 52,500 5 % 3-a. Calculate the unit sales per month at which Frieden management will be indifferent between doing the major upgrade to the manufacturing equipment and not doing the upgrade. Unit sales per month 3-b. Based on the above analysis, should Frieden proceed with the major upgrade? Yes No 3-c. Why or why not? In this case, the indifference point of sales at which point the upgarde the operating income. So Frieden's the current level have an impact on proceed to upgrade. 4-a. Refer to the original data. Instead of doing the major upgrade to the equipment, management is considering introducing a new advertising campaign that will increase fixed expenses by $50,000 per month. Management believes the new advertisements will increase monthly unit sales by 20%. In this case what would be imapact on operating income. Operating income