Frieden Company's contribution format income statement for the most recent month is given below: Sales (47,000 units) Variable expenses Contribution margin Fixed expenses Net operating income $1,316,000 921,200 394,800 315.840 78,960 $ The industry in which Frieden Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Sales Variable expenses Required: 1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $8.40 per unit. However, fixed expenses would increase to a total of $710,640 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. (Input all amounts as positive values except losses which should be indicated by minus sign. Round your "Per unit" answers to 2 decimal places.) $ Amount 1,316,000 921,200 tresent Per Unit $ 28.00 19.60 8.40 Percentage 100 % 70 % 30 % $ Amount Proposed Per Unit 28.00 11.20 16.80 1,316,000 $ 526,400 789,600 $ Percentage 100 % 40 % 60 %

Refer to the income statements in Requirement (1) above. For both present operations and the proposed new operations, Compute:

a. The degree of operating leverage.

Present

Degree of operating leverage

5

Proposed

10

b. The break-even point in dollars.

Present

Proposed

Dollar sales to breakeven

S

c. The margin of safety in both dollar and percentage terms.

Margin of safety in dollars

$

Present

1 315.999

Proposed

$ 1.315,999

The industry in which Frieden Company operates is quite sensitve to cyclical aoverments in the economy ihak pichits visy studying ways of improving profits. Recuired: 1. New equipment has come on the market that would allow Frleden Company to automate a portion of its opetiatiofis. Variable two contribution format income statements; one showirg present operations, and one showing how aperations would appetat i the new equipment were purchased. (lnput oll amounts as positive values except losses which sheuld be indicated by minus sigh. Pnumd vour "Per unit" onswers to 2 decimal places.)