Question 1 [19 marks] Using the following information and contribution margin income statement from last period: Sales Less: Variable Costs Contribution Margin Less: Fixed Expenses Operating Income $ 272,250 Sale price per unit: $ 99 175,000 Units produced and sold last period: 2,750 97,250 80,000 $ 17,250 The company has no beginning or ending inventories. Marks: Required: 2 a. What is the company's break-even sales in dollars? 3 b. If the sales volume increases by 15% and variable costs/unit decreases by $6.00, what will the new operating income be? Produce a Contribution Margin Income Statement. 2 c. What sales in units would be required to attain an operating income of $50,000. 2 d. What is the company's margin of safety in both dollars and percentage? 1 e. Part 1. What is the company's degree of operating leverage based on the original data? 2 4 3 Solution: e. Part 2. Using your answer to Part 1, if sales increased by 20% above the amounts in the original data, how much would operating income increase (dollars)? f. If the business requires an operating income of 25% of sales, what will be the required sales in dollars, assuming all costs and selling prices remain as in the original data? g. Suppose the company had a tax rate of 30% and wants to earn an after tax net income of $20,000. Calculate the sales in units that would be needed from the original data? 15% $ 6.00 $ 50,000 20% 25% 30% $ 20,000