Morton Company's contribution format income statement for last month is given below: Sales (49,000 units $24 per unit) Variable expenses Contribution margin Fixed expenses Net operating income $1,176,000 823,200 352,800 282, 240 $ 70,560 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 eduipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $7.20 per unit. However, fixed expenses would increase to a total of $635,040 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. 2. 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. 3. 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.) 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 30% without any change in selling price; the company's new monthly fixed expenses would be $450,408; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be rec $7.20 per unit. However, fixed expenses would increase to a total of $635,040 each month. Prepare two contribution format income statements, one present operations and one showing how operations would appear if the new equipment is purchased. (Round "Per Unit" to 2 decimal places.) Show Proposed Per Unit Morton Company Contribution Income Statement Present Per Unit 28.00 % 11.20 % $ 16.80 % Amount % % % Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 1,176,000 470,400 705,600 635,040 $ 70,560 OOO 0 0 $ 0.00 0 $ 0 Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate comp 3 , , , , 3. 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.) 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 30% without any change in selling price; the company's new monthly fixed expenses would be $450,408, and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 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 30% without any change in selling price; the company's new monthly fixed expenses would be $450,408; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy. (Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount.) Show less New break even point in dollar $ 1411,200 Required 3