Sales $ 3,240,000

Variable expenses 1,620,000

Contribution margin 1,620,000

Fixed expenses 160,000

Net operating income $ 1,460,000

Refer to the original data. Assume that the company sold 40,500 units last year. The sales manager is convinced that a 14% reduction in the selling price, combined with a $80,000 increase in advertising, would increase annual unit sales by 50%. a. Prepare two contribution format income statements, one showing the results of last years operations and one showing the results of operations if these changes are made.