Purchasing a large oven and related equipment for mixing and baking crazy bread is being considered by Perottis Pizza. The oven and equipment would cost $288,000 delivered and installed. It would be usable for about 20 years, after which it would have a 10% scrap value. The following additional information is available:

a. Perotti, the owner, estimates that purchase of the oven and equipment would allow the pizza parlour to bake and sell 75,000 loaves of crazy bread each year. The bread sells for $1.20 per loaf.

b. The cost of the ingredients in a loaf of bread is 30% of the selling price. Perotti estimates that other costs each year associated with the bread would be as follows: salaries, $20,000; utilities, $5,000; and insurance, $2,000.

c. The pizza parlour uses straight-line depreciation on all assets, deducting salvage value from original cost.

d. Perotti would like all projects to provide a return of at least 6%. (Ignore income taxes.)

Required: 1. Prepare a contribution format income statement showing the operating income each year from production and sale of the crazy bread. Contribution Format Income Statement Sales revenue Less: Cost of ingredients Contribution margin Less operating expenses 0 Utilities Salaries Insurance Depreciation Total operating expenses Operating income 0 2-a. Compute the simple rate of return for the new oven and equipment. (Round your answer to decimal places.) Simple rate of return