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Varishle Costing Income Statement and tifect on Lncome of Change in Operations. Kirnhrell inc. manufactures three sizes of utility tables - wad (6), medium (M), and large (C). The income statement has carsistently indicated a fet loss for the M sire, and campsign to expand the sales of Sue 5 so that the entire plant capacty can continue to be used. If Proposal 2 is selected and Size M is discontinued and production curtailed, the annual fixed production costs and fixed operating expenies rould be reduced by $142, 500 and $28,350, respectively. If Proposal 3 is selected, it is anticipated that an additional annual expenditure of $85,050 for the salary of an assistant brund manager (clasified as a fined operating expense) would yield an additional 130% in Suge 5 sales volume. It is also assumed that the increased production or size 5 woold utilie the plant facilaies releitsed by the discontinuance of size M, The sales and costs have been relatively stabie over the past few years, and they are expected to remain so for the foreseeable future. The inconene statement for the pat year ended Dectember 11,20rB, is as follows: Operating expenses: Variable expenses 1. Prepare an income statecient for the past year in the variable costing formot. Data for each suge should be reported through contribution margin, The fixed cests sheuld be deducted from the total contribution margin, as reported in the "Total" column, to determine operating income. 2. Based on the income statement prepared ie {1} and the other data presented above, determine the amount by which total anniuat operating inconie would be ieduced belumits pritsint level ir proposal 2 is accepted 3. Frepare an income stotement in the vorieble costing format, indicating the projected annual operating income if Proposal 3 is accepted, Data for each atyle ahould be reported theogh contribution margin. The foxed costs sheold be deducted from the total contributon margin as reported in the "fitir" column. for purposes of t thes problert, the idditional expendture of sis,0so for the assistant brand manager's salary can be added to the fosed operating expenses. 4. Hy how much wudid total annual operating income increesie above itsi ptesent level if Proqenal 3 is actedited