Kate is considering going into business producing music books to sell to elementary schools. She has an offer from a publication firm that will charge her a $5,000 setup fee and $1.50 per book. She estimates that she can sell each book for $4.00. A. What is the contribution margin per book? B. Prepare a CVP income statement. C. How many books does Kate need to sell in order to break even? D. Assume that Kate wants to earn a profit of $4,000. Calculate the number of books Kate needs to sell to earn a profit of $4,000. E. Assume that Kate estimates that she can sell 3,500 books. What is Kate's margin of safety in number of units and margin of safety rate? PART III: CVP Solution Section A. Contribution margin per unit-selling cost-variable cast = 4-1.5 = $2.5 per book B. CVP Income statement C. Number of books to break even-fixed casts/cantibution per mit= 5000/2.5-2000 books fined cast + profit D. Number of books for $4,000 profit contribution per beak (5000+4000)/2.5 = 3600 books] E. Margin of safety in units and margin of safety rate total sale units" break even units = 3500-2000= Margin of safety rate; 1500 books 1500 42.86% 3500 computations. Circle your answers. A. Using the CVP income statement prepared in Part III, B above, compute the operating leverage factor. B. Assume that Kate has a 10% increase in sales of the number of books that she originally estimated. What is the percentage increase in operating income? Place your answers in the spaces provided below. Show all C. If Kate spends an additional $1,000 on advertising, she estimates that she will sell an additional 500 books. What is the dollar amount of increase in income? PART IV-Solutions Section A. Operating leverage factor B. Percentage increase in operating income C. Increase in income