Note: Sales revenue $540,000 Variable expenses 360,000 Contribution margin 180,000 Fixed costs 100,000 Operating income $ 80,000

3 2 3 2. Bradjoli Inc. produces a single product. The results of operations for a typical month are as follows: The company produced and sold 120,000 kgs of product during the month, and there were no beginning or ending inventories. Bradjoli pays income tax at a rate of 25%. Required: a) At the typical sales volume, calculate: i) the breakeven point is units sold and in sales dollars. ii) the margin of safety as a percentage. iii) the operating leverage. Using the operating leverage, determine the operating profit that Bradjoli would report if sales were to increase 40%. b) Compute the target sales in units and sales dollars if Bradjoli wants to earn an after-tax profit of $162,000. i) At this sales volume, what is the operating leverage? ii) At this sales volume, determine the operating profit that Bradjoli would report if sales were to increase 40%. c) Using the typical month's operating results as the starting point, calculate the breakeven point if Bradjoli plans to invest in automation with a monthly fixed cost of $25,000 and expects this will reduce variable expenses by $0.50 per unit. Do you recommend the company undertake this investment? Why or why not? 1 1 4