---------------------------------------------------------------------------------

Here is the formatting example found in the book (Exhibit 13-1) as to how my professor expects this problem to look like:

EXHIBIT 131 Total and Differential Costs With Without the New Machine New Machine Differential Costs and Benefits Sales (5,000 units * $40 per unit) $200,000 $200,000 $ 0 Variable expenses: Direct materials (5,000 units x $14 per unit) 70,000 70,000 0 Direct labor (5,000 units * $8 per unit; 5,000 units * $5 per unit) 40,000 25,000 15,000 Variable overhead (5,000 units x $2 per unit) 10,000 10,000 0 Total variable expenses 120,000 105,000 Contribution margin 80,000 95,000 Fixed expenses: Other 62,000 62,000 0 Rental of new machine 0 3,000 (3,000) Total fixed expenses 62,000 65,000 Net operating income $ 18,000 $ 30,000 $12,000