O'Reilly Manufacturing sold 405,000 units of its product for $66 per unit in 2017. Variable cost per unit is $56, and total fixed costs are $1,620,000. Read the requirements. ..... Requirement 1. Calculate (a) contribution margin and (b) operating income. (a) Determine the formula used to calculate the contribution margin. Contribution margin Requirements 1. Calculate (a) contribution margin and (b) operating income. 2. O'Reilly's current manufacturing process is labor intensive. Kate nn, O'Reilly's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $5,265,000. The variable costs are expected to decrease to $52 per unit. O'Reilly expects to maintain the same sales volume and selling price next year. How would acceptance of Hoffmann's proposal affect your answers to (a) and (b) in requirement 1? 3. Should O'Reilly accept Hoffmann's proposal? Explain