Contribution Income Statement and Operating Leverage

Willamette Valley Fruit Company started as a small cannery-style operation in 1999. The company now processes, on average, 20 million pounds of berries each year. Flash-frozen berries are sold in 30 pound packs to retailers. Assume 650,000 packs were sold for $75 each last year. Variable costs were $42 per pack and fixed costs totaled $14,250,000.

Contribution Income Statement and Operating Leverage Willamette Valley Fruit Company started as a small cannery-style operation in 1999. The company now processes, on average, 20 million pounds of berries each year. Flash-frozen berries are sc in 30 pound packs to retailers. Assume 650.000 packs were sold for $75 each last year. Variable costs were $42 per pack and xed costs totaled $14,250,000. (a) Prepare a contribution income statement for the year ended December 31 . HINT: Use a negative sign with both "costs" answers. WiLLAi-JIETTE VALLEY FRUIT COMPANY Contribution Income Statement For the Year Ended December 3| Sales 3 Variable costs Contribution margin Fixed costs Net Income $ (b) Determine the company's operating leverage. {Round your answer to two decimal places.) (c) Calculate the percentage change in prots if sales decrease by 10 percent. (Round your answer to one decimal place.) % decrease (d) Management is considering the purchase of several new pieces of packaging equipment. This will increase annual xed costs to $15,500,000 and reduce variable costs to $40 per crate. Calculate the effect of this acquisition on operating leverage and explain any change (Round your answers two decimal places.)