High Country, Incorporated, produces and sells many recreational products. The companyjust opened a new plant to produce a folding camp cot that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month ofthe plant's operation: Beginning inventory 6 Units produced 35,006 Units sold 36,006 Selling price per unit $ 81 Selling and administrative expenses: Variable per unit $ 3 Fixed (per month) $ 566,006 Manufacturing costs: Direct materials cost per unit $ 17 Direct labor cost per unit $ 16 Variable manufacturing overhead cost per unit $ 2 Fixed manufacturing overhead cost (per month) $ 595,006 Required: 1. Assume the company uses absorption costing. 3. Calculate the camp cot's unit product cost. b. Prepare an income statement for May. 2. Assume the company uses variable costing. 3. Calculate the camp cot's unit product cost. b. Prepare a contribution format income statement for May. Morton Company's contribution format income statement for last month is given below: Sales (48,660 units x $ 21 per unit) $ 1,608,006 Variable expenses 705,500 Contribution margin 302,400 Fixed expenses 241,920 Net operating income $ 66,480 The industry in which Morton 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 prots. Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $6.30 per unit. However, fixed expenses would increase to a total of $544,320 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the breakeven point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. Refer again to the data in (1). As a manager, what factor would be critical in deciding whether to purchase the new equipment? (Assume enough funds are available to make the purchase.) Refer to the original data. Rather than purchase new equipment, the marketing manager argues the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the company's new monthly xed expenses would be $386,064; and its net operating income would increase by 20%. Compute the company's breakeven point in dollar sales under the new marketing strategy. Gayne Corporation's contribution margin ratio is 18% and its fixed monthly expenses are $46,500. If the company's sales for a month are $304,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change. Multiple Choice O $202,780 O $8,220 O $257,500 O $54,720