managerial accounting hw. thank you for the help.
Morton Company's contribution format income statement for last month is given below: Sales (46,000 units * $23 per unit) Variable expenses $1,058,000 740,600 Contribution margin Fixed expenses 317,400 253,920 Net operating income $ 63,480 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 profits. 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 $6.90 per unit. However, fixed expenses would increase to a total of $571,320 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. (Round your "Per unit" answers to 2 decimal places.) 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 $6.90 per unit. However, fixed expenses would increase to a total of 5571,320 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. (Round your "Per unit" answers to 2 decimal places.) Morton Company Contribution Income Statement Present Amount Per Unit Proposed Per Unit Amount Refer to the income statements in (1) above. For both present operations and the proposed operations, compute a. The degree of operating leverage Present Proposed Degree of operating leverage b. The break-even point in dollar sales. Present Proposed Break-even point in dollar c. The margin of safety in both dollar and percentage terms Present Proposed Margin of safety in dollar Margin of safety in percentage 3. Refer again to the data in (1) above. As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.) Cyclical movements in the economy Reserves and surplus of the company Stock level maintained Performance of peers in the indstry 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that 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 50% without any change in selling price, the company's new monthly fixed expenses would be $317.400, and its net operating income would increase by 25%. Compute the break-even point in dollar sales for the company under the new marketing strategy. New break even point in dollar sales
