Snowridge Manufacturing has a factory that produces custom bathroom cabinets. Should the company consider the changes from Schedule-6? Why or why not? A comprehensive discussion is needed to fully answer this question. Please consider and discuss the following areas: fixed costs change, economies of scale, CM per unit change and sales fluctuation. In addition, give some real examples of additional cost increases for fixed costs and decreases for direct materials that could be implemented for this specific business. (at least 3 examples in total).

O SCHEDULE 5 SNOWRIDGE MANUFACTURING CVP INCOME STATEMENT Volumes By Unit 400 1,000 1,582,000 $ 3,955,000 $ 4,746,000 $ 1,200 per unit $ 3,955 Sales Revenue Less: Variable Costs Direct Materials Direct Labor Sales Commision Office Utilities & Misc. Office Expenses Sales Travel Total Variable Costs 1,600 300 45 640,000 120,000 18,000 4,000 9,600 791,600 1,600,000 300,000 45,000 10,000 24,000 1,979,000 1,920,000 360,000 54,000 12,000 28,800 2,374,800 10 24 1,979 790,400 1,976,000 2,371,200 1,976 Total Contribution Margin Less: Fixed Costs Total Fixed Cost Operating Income 1,007,000 (216,600) $ 1,007,000 969,000 $ 1,007,000 1,364,200 1,007 969 $ $ SCHEDULE 5A BREAK-EVEN UNITS & SALES 510 units $ 2,017,050 Break-even Units Break-even Sales ($) SCHEDULE 6 SNOWRIDGE MANUFACTURING REVISED CVP INCOME STATEMENT Volumes By Unit per unit 400 800 4,034 $ 1,613,640 $ 3,227,280 $ 1000 4,034,100 $ 1200 4,840,920 $ 1,728,000 360,000 Sales (increase 2%) Less: Variable Cost Direct Material (decrease 10%) Direct Labor Sales Commission Office Utilities & Misc. Office expenses Sales Travel Total Variable Costs 1440.00 300.00 45.00 10.00 24.00 1819.00 576,000 120,000 18,000 4,000 9,600 727,600 1,152,000 240,000 36,000 8,000 19,200 1,455,200 1,440,000 300,000 45,000 10,000 24,000 1,819,000 54,000 12,000 28,800 2,182,800 2215.10 886,040 1,772,080 2,215,100 2,658,120 Total Contribution Margin Less: Fixed Costs Total Fixed Cost (increase 25%) Operating Income 1258.75 956 $ 1,258,750 (372,710) $ 1,258,750 513,330 $ 1,258,750 956,350 $ 1,258,750 1,399,370 $