Current cost structure:

Current annual sales and revenue $$ $$2,000,000$

Current variable cost $44\%$ of sales

Current fixed costs totaled $-$ $$600,00$ Questions to answer:

$9.$ Strategy #$1.$ This strategy is to purchase more automated processing equipment.

This strategy would increase fixed costs by $$100,000$

This strategy would decrease variable costs to $25\%$ of sales

What is the break$-$even point in sales dollars for strategy #$1?$

Prepare an updated Contribution margin income statement based on strategy #$1$ at the current sales level.

Sales:

Less Variable costs:

Contribution margin:

Less Fixed costs:

Profit:

$10.$ Strategy #$2.$ This strategy is to outsource the fruit processing.

This strategy would reduce fixed costs by $$100,00$

This strategy would decrease variable costs to $35\%$

What is the break$-$even point in sales dollars for strategy #$2?$

Prepare an updated Contribution margin income statement based on strategy #$2$ at the current sales level.

Sales:

Less variable costs:

Contribution margin:

Less fixed costs:

Profit:

$11.$ Describe one strength and one weakness for each of the strategies. Recommend to management which strategy you would recommend and why?