The Dial Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great popularity, and the company has ample orders to keep production going at its full capacity of 2,000 sets per year.

The patio sets are normally sold for $400 per set. Dial can increase capacity by 500 units to 2,500 units (from previous capacity of 2,000 units) but must pay $25,000 to do so.

Annual cost data for the production of 2,000 sets are classified as follows:

		Cost Behavior		Selling or Administrative						Product Cost
	Cost Item	Variable	Fixed	Cost						Direct	Indirect
	Direct labor........................................................................	$118,000								$118,000
	Advertising........................................................................		$50,000	$50,000
	Factory supervision...........................................................		40,000								$40,000
	Property taxes, factory building........................................		3,500								3,500
	Sales commissions............................................................	80,000		80,000
	Insurance, factory..............................................................		2,500								2,500
	Depreciation, administrative office equipment.................		4,000	4,000
	Lease cost, factory equipment...........................................		12,000								12,000
	Indirect materials, factory.................................................	6,000									6,000
	Depreciation, factory building...........................................		10,000								10,000
	Administrative office supplies..........................................	3,000		3,000
	Administrative office salaries............................................		60,000	60,000
	Direct materials used.........................................................	94,000								94,000
	Utilities, factory.................................................................	20,000									20,000
	Total costs.........................................................................	$321,000	$182,000	$197,000						$212,000	$94,000

For each question, please use up to 100 words.

1. Please prepare a contribution margin income statement at normal capacity and label the income statement as Figure 1. Please show the following format and show columns for totals and per unit. Assume that sales are priced at the normal price.

	Total at $2,000 Units	Per Unit
Sales
Variable Costs
Contribution Margin
Fixed Costs
Operating Income