Requirements 1. Calculate (a) contribution margin and (b) operating income. 2. O'Reilly's current manufacturing process is labor intensive. Kate Wagner, O'Reilly's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $6,075,000. The variable costs are expected to decrease to $34 per unit. O'Reilly expects to maintain the same sales volume and selling price next year. How would acceptance of Wagner's proposal affect your answers to (a) and (b) in requirement 1? 3. Should O'Reilly's executives accept Wagner's proposal? Explain.