Morton Company's contribution format income statement for last month is given below: The industry in which Morton Company operates is quite sensaive 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 Monton Company to automate a portion of its operations. Variable expenses would be reduced by $8.40 per unit. However, fixed expenses would increase to o total of $680.400 each month. Prepore two contribution format income statements, one showing present operations ond one showing how operations would oppear it the new equipment is purchosed. 2. Refer to the income statements in (i) For the present operations and the proposed new operations, compute (o) the degree of operating leverage, (b) the break-even point in dollar soles, and (c) the margin of safety in dollors and the margin of safety percentoge. 3. Refer again to the doto in (i). As a manager, what factor would be paramount in your mind in deciding whether to purchase the new: equipment? (Assume that enough funds are ovallable to moke the purchase.) 4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company's marketing stretegy should be changed. Rother than pay sales commissions, which are currently included in variable expenses, the company would phy solespersons fiwed salaries and would invest heavily in advertiting. The marketing monager claims this new opprosch wou'd increase unit sales by 3015 without any change in selling price; the company's new monthly fixed expenses would be $482,580, and ins nat operoting income would increase by. 20N. Compute the company's break-even point in dollor sales under the new marketing strategy. Complete this question by entering your answers in the tabs below. New equipment has come onto the market that would allow Morton Company to automate a partion of its operafions. Variable expenses would be reduced by $8.40 per unit. However, fixed expenses would increase to a total of $680,400 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. Note: Round "Per Unit" to 2 dedimal places. Complete this question by entering your answers in the tabs below. Refer to the income statements in (1). For the present perations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. . 1234 should be entered as 12,34 ). Complete this question by entering your answers in the tabs below. Refer again to the data in (1). 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 Performance of peers in the industry stock level maintained Complete this question by entering your answers in the tabs below. 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 30% without any change in selling price; the company's new monthly fixed expenses would be $482,580; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount
