London and Paris are the owners of the London Processing Company and the Paris Manufacturing Company, respectively. These companies manufacture and sell the same product, and competition between the two owners has always been friendly. Cost and profit data have been freely exchanged. Uniform selling prices have been set by market conditions. Mr. London and Ms. Paris differ markedly in their management thinking. Operations at London are highly mechanized, and the direct labor force is on a fixed-salary basis. Paris uses manual hourly-paid labor for the most part, and pays incentive bonuses. London's salesmen are paid a fixed salary, whereas Paris salesmen are paid small salaries plus commissions. Ms. Paris takes pride in her ability to adapt her costs to fluctuations in sales volume and has frequently chided Mr. London on London "inflexible overhead." During 2015, both firms reported the same profit on sales of $618, 750. However, when comparing results at the end of 2016, Ms. Paris was startled by the following results: On the assumption that operating inefficiencies m have existed, Ms. Paris and her accountant made a thorough investigation of costs, but could not uncover any evidence of costs that were out of line. At a loss to explain the difference in profits on a much higher increase in sales volume, they have asked you to prepare an explanation. You find that the fixed costs recorded over the two-year period were $433, 125 each year for London and $61, 875 each year for Paris. REQUIRED: Show all calculations and use good format! Redo the income statements emphasizing contribution margin. Calculate break-even point for each company. Calculate degree of operating leverage at a revenue level of $618, 750. Calculate the volume of sales that Paris would have had to have in 2016 to achieve the profit of $160, 875 realized by London in 2016. Comment on the relative future positions of the two companies when there are as well as increases in sales volume