Problem I Volta Company manufactured and sells a telephone answering machine. The company's income statement for the most recent year is given bellow: Sales (20,000 units) Less variable expenses Contribution margin Less fixed expenses Net income Total Per Unit Percent $1,200,000 $60 100 900,000 45 ? 300,000 15 ? 240,000 $ ? Management is anxious to improve the company's profit performance and has asked for several items of information. Required: 1. Compute the company's CM ratio and variable expenses ratio. 2. Company the company's break-even point in both units and sales dollars 3. Assume that sales increases by $400,000 next year. If cost behavior patterns remain unchanged, by how much will company's net income increase? use the CM ratio to determine your answer. 4. Refer to the original data. Assume that next year management wants the company's eam a minimum profit of $90,000. How many units will have to be sold to meet this target profit figure 5. Refer to original data. Compute the company's margin of safety (MS) in both dollars and percentage form. 6. a. Compute the company's degree of operating leverage at the present level of sales. b. Assume that through a more intense effort by the sales staff, the company's sales increase by 8% next year. By what percentage would you expect net income to increase? Use the operating leverage concept to obtain your answer. 7. In an effort to increase sales and profit, management is considering the use of a higher-quality speaker would in the answering machine. The product would increase variable cost by $3 per unit, but management could eliminate one quality inspector who is paid a salary of $30,000 per year. The sales manager estimates that the product would increase annual sales by at least 20%. a. Assuming the changes are made as described above, prepare a project income statement for next year. Show data on a total, per unit, and percentage basis. b. Compute the company's new break-even point in both units and dollars of sales. Use the unit contribution method and would you recommend that the changes be made?