Option 1 Option 2 Option 3 Option 4 Selling Price Per Unit Variable cost Per Unit Fixed Cost Units Sold Current 70.00 30.00 100,000 5,000 Sales Variable Cost Contribution Margin Fixed Costs Net Income 350,000 150,000 200,000 100,000 100,000 Conclusion - What should Derby do? CVP, sensitivity analysis. The Derby Shoe Company produces its famous shoe, the Divine Loafer, that sells for $70 per pair. Operating income for 2017 is as follows: Sales revenue ($70 per pair) Variable cost ($30 per pair) Contribution margin Fixed cost Operating income $350,000 150,000 200,000 100,000 $100,000 Derby Shoe Company would like to increase its profitability over the next year by at least 25%. To do so, the company is considering the following options: Required 1. Replace a portion of its variable labor with an automated machining process. This would result in a 20% decrease in variable cost per unit but a 15% increase in fixed costs. Sales would remain the same. 2. Spend $25,000 on a new advertising campaign, which would increase sales by 10% 3. Increase both selling price by $10 per unit and variable costs by $8 per unit by using a higher-quality leather material in the production of its shoes. The higher-priced shoe would cause demand to drop by approximately 20%. 4. Add a second manufacturing facility that would double Derby's fixed costs but would increase sales by 60%. Evaluate each of the alternatives considered by Derby Shoes. Do any of the options meet