Morton Company's contribution format income statement for last month is given below:

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:

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 $$8\mathrm{.}10$ per unit. However, fixed expenses would increase to a total of $$626,940$ 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.

Refer to the income statements in $(1).$ For the present operations 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.

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.$)$

Refer to the original data. Rather than purchase new equipmentat, 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 $$444,663$; and its net operating income would increase by $20\%.$ Compute the company's break$-$even point in dollar