Hot Tubs Unlimited purchases hot tubs from a well-known manufacturer and sells them at the retail level. The hot tubs sell, on the average, for $2,500 each. The average cost for a hot tub from the manufacturer is $1,500.

The additional January 2020 monthly costs for the company are listed:

Costs Cost Formula

Selling:
Advertising	$950 per month
Delivery of hot tubs	$60 per hot tub sold
Sales salaries and commissions	$3,800 per month, plus 4% of sales
Utilities	$650 per month
Depreciation on sales facilities	$5,000 per month
Administrative:
Executive salaries	$13,500 per month
Depreciation on office equipment	$900 per month
Clerical	$2,500 per month, plus $40 per hot tub sold
Insurance	$700 per month

During January the company sells 60 hot tubs.

Required:

1. Prepare the monthly income statement in the traditional format and in the contribution margin format.
2. Calculate the contribution margin per unit and contribution margin ratio.
3. Calculate the breakeven point in units and in dollars of sales.
4. Calculate the margin of safety and margin of safety percentage.
5. Calculate the degree of operating leverage.
6. The company would like to earn $38,000 of net operating income. What will be the required sales in units and in dollars?