Q7 Midland Company is analyzing two alternative methods of producing its product. The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production, but fixed costs would increase. Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed. Calculate the Contribution margin, Break even and CVP income statements for both options at 30,000 units. Recommend the best option and why. Alternative 1 Variable costs per/unit $20 Selling price per unit $40 $200,000 Income tax rate 25% Fixed costs Units 1 Contribution Margin Ratio Break Even in Units Break Even in Sales Dollars Alternative 2 Variable costs per/unit Fixed costs Units Selling price per unit Income tax rate $40 25% $274,400 Contribution Margin Ratio Break Even in Units Break Even in Sales Dollars CVP Income Statement Alternative 2 Alternative 1 Break even Units Sales Variable Costs Contribution Margin Fixed Costs EBIT Recommendation