this case includes an internal income statement using the contribution format as of April 30, 2021:

COP- 26 Inc. Contribution Format Income Statement April 30, 2021

Revenues $ 800,000 Variable Expenses 560,000 Contribution Margin $ 240,000 Fixed Expenses $ 192,000 Net Operating Income $ 48,000

Note: Revenues based on 40,000 units sold.

The industry in COP-26 Inc. works in is quite cyclical with the movements in the economy. Thus, profits vary considerably from year to year according to the general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

The company has the following ideas:

a. An opportunity to buy new equipment that would automate a portion of its operations. Variable expenses would be reduced by $6 per unit. However, fixed expenses would increase to a total of $432,000 each month. You will need to prepare two contribution format income statements: one showing how operations would be with the new equipment and one showing the present situation.

b. Now look at both present and proposed new operations and calculate the breakeven point in dollars and do an analysis that includes the degree of operating leverage and margin of safety in both dollars and percentage terms.

c. As one the members on the management team what factor would be paramount in your mind in deciding whether to purchase the new equipment. (Assume that the loan is not an issue as there is money available.)

d. A second option is instead of buying the equipment, the marketing team has proposed a new strategy. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespeople be paid fixed salaries and that the company invest heavily in advertising. The marketing manager claims that the new approach would increase unit sales by 50% without any change in selling price; the companys new monthly fixed expenses would be $240,000; and its net operating income would increase by 25%. Calculate the break-even in dollar sales for the company under the new marketing strategy. As one of the members of the management team making decisions on this option, would you agree with the marketing teams proposal?

Finally as the company reflects on its current situation, the senior management team wants to reflect on the concept of leadership and identify three important concepts that a leader must consider and briefly explain them.