Long Wade purchases turntables from their manufacture for resale. Long Wage resells the turntables for $2000 each on average. Turntables cost $1200 on average. Long Wade pays their salespeople a monthly salary plus a sales commission of 15%. Monthly advertising costs are $25,000 and monthly salaries total $50,000. Long Wage sold 1,500 turntables in March. They pay a corporate tax rate of 12%.

1. For the month of March, prepare a three column income statement in contribution format

2. Calculate the following for March

i. Contribution margin ratio

ii. Breakeven point in sales revenue

iii. margin of safety in units

iv. operating leverage

3, If the target net income is $726,000 for next month, how many turntables would have to be sold ?

4. The sales manager is convinced that if all the following changes are implemented next month, unit sales will double (refer to the original data)

- decrease the unit selling price by $200.

- increase the monthly sales salaries by 100%

- increase the advertising budget by $72,000 per year.

- increase the sales commission to 20%

5. Calculate the total impact on operating income of making all of the above changes and make recommendations to management based on the calculations.

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