Your company produces and sells bicycles. Provided below is the contribution margin income statement based on expectations for the following year if no changes are made to the production process. There are two alternatives the company could employ to potentially improve income, but the deciding manager doesn't know which option $($if either$)$ would yield the best operating income. Create a contribution margin income statement for each alternative scenario and determine which option should be recommended for the company.

Scenario $1$:The company can invest in new factory equipment that will reduce the variable cost per unit by $$40.$ The new equipment will increase fixed costs by $$55,000$ per year. Sales are unexpected to change.

Scenario $2$: The company can cut scale back their production to reduce overall costs. This would reduce fixed costs to $$63,000,$ but only $600$ units could be produced and sold.

Which of the options should you recommend based on operating income?