Contribution Income Statement and Operating Leverage

Stateline Berry Farm harvests early$-$season blueberries for shipment throughout Michigan and Illinois in July. The strawberry farm is maintained by a permanent staff of $10$ employees and seasonal workers who pick and pack the blueberries. The blueberries are sold in crates containing $100$ individually packaged one$-$quart containers. Affixed to each one$-$quart container is the distinctive Stateline Berry Farm logo inviting buyers to "Enjoy the berry best blueberries in the world!" The selling price is $$90$ per crate, variable costs are $$80$ per crate, and fixed costs are $$280,000$ per year. In the year $2017,$ Stateline Berry Farm sold $50,000$ crates.

$($a$)$ Prepare a contribution income statement for the year ended December $31,2017.$ HINT: Use a negative sign with both "costs" answers.

$($b$)$ Determine the company's $2017$ operating leverage. $($Round your answer to two decimal places.$)$

$($c$)$ Calculate the percentage change in profits if sales decrease by $10$ percent. $($Round your answer to one decimal place.$)$

$\%$ decrease

$($d$)$ Management is considering the purchase of several berry$-$picking machines. This will increase annual fixed costs to $$375,000$ and reduce variable costs to $$77\mathrm{.}50$ per crate. Calculate the effect of this acquisition

on operating leverage and explain any change. $($Round your answers two decimal places.$)$