"Sales (20,000 units) - Total: $1,200,000 Per Unit: $60 Sales Percentage: 100% Variable Costs - Total: $900,000 Per Unit: $45 Sales Percentage: ?% Contribution Margin - Total: $300,000 Per Unit: $15 Sales Percentage ?% Fixed Costs - Total: $240,000 Operating Income: $60,000 The management wishes to increase the company's profits and has requested an analysis of several elements. Required:

Calculate the contribution margin percentage and variable cost percentage.

Calculate the break-even point, both in units and sales dollars.

Suppose that the next year there is an increase of $400,000 in sales. If cost behavior patterns do not change, by how much will the operating income of the company increase? Use the contribution margin percentage as the basis for your response.

Review the original data. Suppose that management wants the company to achieve at least $90,000 in profit the following year. How many units must be sold to reach the target profit?

Review the original data. Calculate the margin of safety in dollars and as a percentage.

a. Calculate the degree of operating leverage of the company for the current level of sales. b. Suppose that, through an effort by the sales department, sales increase by 8% the following year. In what percentage would you expect the operating income to increase? Use the degree of operating leverage (operational leverage) to obtain your response. c. Verify your response to the previous question by preparing a new Income and Expense Statement with the contribution margin format showing an 8% increase in sales.

As part of an effort to increase sales and profits, management is considering the use of a higher-quality speaker. This speaker would increase variable costs by $3 per unit, but management could eliminate a quality inspector who receives an annual salary of $30,000. The sales manager estimates that the higher-quality speaker would increase annual sales by at least 20%. a. Suppose the described changes are implemented. Prepare an Income and Expense Statement in contribution margin format for the following year. Show the total, per unit, and percentage data. b. Calculate the new break-even point in units and sales dollars. c. Would you recommend making these changes? Explain."