The company Delta Corp. has the following profit & loss account.

Sales	200.000
Direct materials	140.000
Labor	20.000
Depreciation	10.000
Utilities	3.659
Rental cost	3.265
Commisions	4.000
Transportation cost	4.000
EBIT	15.076

The CEO of the company has hired you as consultant to support him in his management decisions regarding prices and volumes.

As you want to make a proper analysis so decide to make a revised income statement that employs a contribution margin format that will be useful in CVP analysis. For this purpose, you ask for additional information which is the split of the accounts:

Cost Line/ Expenses

Labor	20.000
Direct	10000
Plant manager	2000
Sales & Admin	8000
Control	0
Depreciation	10000
Direct machinery	4865
installations	2587
Office furniture	2548
control	0
Utilities	3.659
Plant	2459
Offices	1200
Control	0
Rental cost	3.265
Office	2600
Plant	665
Control	0

Additional information regarding sales is that the average price per unit for las year was 1.

200.000 units

1. Prepare the revised income statement and explain which of the cost lines is direct or indirect costs and why. (25 points)
2. Which is the contribution margin of the company? (5 points)
3. What number of units must the company sell for break-even (5 points)
4. What is the sales figure that the company need to achieve if the want to have an EBIT of 10000? (5 points)
5. What would be the EBIT if the company reduces salaries in 12% and increases sales in 12%? (5 points)
6. The company receives a proposal of a customer that wants to buy 20000 units at a price discount of 25%.

In this case this sale would not affect our traditional customers, they would not notice. Should we accept the order if we do not have capacity constrains? (5 points)

7. What are the dangers of using CVP analysis? (5 points)