Question 5 Stratford Company distributes a lightweight lawn chair that sells for 15 per unit. Variable expenses are 6 per unit, and fixed expenses total 180,000 annually. Required a) Calculate the contribution margin (CM) ratio for the lawn chair and using the CM ratio, determine the break-even point of sales (s). (5 marks) Assume that the operating results for last year were as follows: Sales 360,000 Variable expenses 144,000 Contribution margin 216,000 Fixed expenses 180.000 Net operating income 36,000 b) Calculate the degree of operating leverage at the this level of sales. (3 marks) c) Having analysed last year's sales data, when the company sold 28,000 units, the Sales Manager is convinced that a 10% reduction in the selling price, combined with a 70,000 increase in advertising expenditure, would increase annual unit sales by 50%. Prepare two contribution format income statements side-by-side showing the results of last year's operations alongside the results of operations if the Sales Manager's ideas are adopted. (7 marks)