Gerald Products Limited sells a single product. Dan the manager of Gerald's has provided the following information for the year ended January 31, 2021 when the company sold 40,000 units. Selling price per unit $ 25.00 Variable cost per unit $ 15.00 Fixed cost per unit $ 9.50 Required:

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(a) Prepare a contribution format income statement for the year ended January 31, 2021. Include per unit & % columns.

(b) Calculate breakeven point both in terms of sales dollars and units.

(c) Calculate the margin of safety in dollars & the degree of operating leverage.

(d) In an effort to try & improve sales Dan is considering the following options:

1. Dan feels that they should make a higher quality product by using better materials. The new materials will increase the cost per unit by $2.00 but will increase their sales volume by 20%. They will also increase their fixed advertising costs by $5,000 to let customers know of the better quality

2. Sarah, the sales manager feels that if they decrease the selling price by 10% & increase advertising by $5,000 they will sell an additional 10,000 units Write a memo to Dan telling her which option if any you would recommend. Show calculation to support your answer.