Part A: Fixed and Variable Cost Stuart Manufacturing produces metal picture frames. The company's income statements for the last two years are given below: Last year This year Units sold................................................... 50,000 70,000 Sales........................................................... $800,000 $1,120,000 Cost of goods sold ..................................... 550,000 710,000 Gross margin ............................................. 250,000 410,000 Selling and administrative expense ........... 150,000 190,000 Net operating income ................................ $100,000 $ 220,000 The company has no beginning or ending inventories. Required: a. Estimate the company's total variable cost per unit and its total fixed costs per year. (Remember that this is a manufacturing firm.) b. Compute the company's contribution margin for this year. Part B: Cost-Volume-Profit Analysis Belli-Pitt, Inc, produces a single product. The results of the company's operations for a typical month are summarized in contribution format as follows: Sales................................... $540,000 Variable expenses.............. 360,000 Contribution margin .......... 180,000 Fixed expenses .................. 120,000 Net operating income ........ $ 60,000 The company produced and sold 120,000 kilograms of product during the month. There were no beginning or ending inventories. Required: a. Given the present situation, compute 1. The break-even sales in kilograms. 2. The break-even sales in dollars. 3. The sales in kilograms that would be required to produce net operating income of $90,000. 4. The margin of safety in dollars. b. An important part of processing is performed by a machine that is currently being leased for $20,000 per month. Belli-Pitt has been offered an arrangement whereby it would pay $0.10 royalty per kilogram processed by the machine rather than the monthly lease. 1. Should the company choose the lease or the royalty plan? 2. Under the royalty plan compute break-even point in kilograms. 3. Under the royalty plan compute break-even point in dollars. 4. Under the royalty plan determine the sales in kilograms that would be required to produce net operating income of $90,000.