Manufacturing sold 445,000 units of its product for $70 per unit 2017.

Variable cost per unit is $60,and total fixed costs are $1,780,000.

1.	Calculate (a) contribution margin and (b) operating income.
2.	Davidson's current manufacturing process is labor intensive. Kate Fischer, Davidson's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $5,340,000. The variable costs are expected to decrease to $42 per unit. Davidson expects to maintain the same sales volume and selling price next year. How would acceptance of Fischer's proposal affect your answers to (a) and (b) in requirement 1?
3.	Should Davidson accept Fischer's proposal? Explain.