P$10-9$ Contribution Margin and Break$-$Even Analysis Grand Canyon Manufacturing Inc. produces and sells a product with a unit price of $$100.$ The following cost data have been prepared for its upper and lower activity limits: L$$mite inferior L$$mite superior Production $($units$)40006000$ Production costs: Direct materials $$60,000\mathrm{.}00$ $$90,000\mathrm{.}00$ Direct labor $$80,000\mathrm{.}00$ $$120,000\mathrm{.}00$ Indirect expenses: Indirect materials $$25,000\mathrm{.}00$ $$37,500\mathrm{.}00$ Indirect labor $$40,000\mathrm{.}00$ $$50,000\mathrm{.}00$ Depreciation $$20,000\mathrm{.}00$ $$20,000\mathrm{.}00$ Selling and administrative expenses: Sales salaries $$50,000\mathrm{.}00$ $$65,000\mathrm{.}00$ Office salaries $$30,000\mathrm{.}00$ $$30,000\mathrm{.}00$ Advertising $$45,000\mathrm{.}00$ $$45,000\mathrm{.}00$ Other $$15,000\mathrm{.}00$ $$20,000\mathrm{.}00$ Total $$365,000\mathrm{.}00$ $$477,500\mathrm{.}00$ The following is required: Classify each cost element as variable, fixed, or semi$-$variable. $($Hint: Remember that variable expenses must increase in direct proportion to changes in the volume of activity.$)$ Calculate the break$-$even point in units and dollars. $($Hint: First use the high$-$low method studied in Chapter $4$ to divide costs into their fixed and variable components.$)$ Prepare a break$-$even chart. Prepare a contribution income statement, similar in format to the statement on page $540,$ assuming sales of $5,000$ units. Recalculate the break$-$even point in units, assuming variable costs increase by $20\%$ and fixed costs decrease by $$50,000.$