The following monthly data are available for the Challenger Company and its only product, Product SW: Total Per Unit Sales (400 units) $110,000 $275 Variable expenses 44,000 110 Contribution margin $66,000 $165 Fixed expenses Net income 52,800 $13,200 2 Show your calculations to get part marks 1) Calculate Margin of safety percentage. If the company is expecting a decrease of sales by 25%. Explain (in words) how this decrease will affect the company's operating income using the margin of safety percentage? (3 Marks) 2) Assume that Challenger Company is currently selling 400 units of Product SW per month. Management wants to increase sales and feels that this can be done by cutting the selling price by $25 per unit and increasing the advertising budget by $20,000 per month. Management believes that these actions will increase unit sales by 50%. Should these changes be made? (5 marks) 3) Assume that Challenger Company is currently selling 400 units of Product SW. Management wants to automate a portion of the production process for Product SW. The new equipment would reduce direct labour costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of $10,000. Management believes that the new equipment will increase the reliability of Product SW, thus resulting in an increase in monthly sales of 12%. Compute the Degree of Operating Leverage to two decimal places if these changes are applied. (6 marks) 4) Refer to the original data. Determine the sales level in dollars at which the Challanger company can achieve a 10% increase in operating income (Ignore taxes). (4 marks)