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Patel Enterprises is studying the addition of a new product that would have an expected selling price of Rs 160 and expected variable cost of Rs 100. Anticipated demand is 8,000 units. A new salesperson must be hired because the company's current sales force is working at capacity. Two compensation plans are under consideration: Man 1: An annual salary of is 32,000 plus 10%% commission based on gross sales Rupees Required: Plan 2: An annual salary of Rs 140,000 and no commission a) What is meant by the term "operating leverage"? b) Calculate the contribution margin and net income of the two plans at 8,000 units. Compute the operating leverage factor of the two plans at 8,000 units. Which of the two plans is more highly leveraged? Why? SALAMAT Corporation has a machining capacity of 200,000 hours per year. Utilization of capacity is normally 756; It has been as low as 40% and as high as 904. An analysis of the accounting records revealed the following selected costs: At a 40% At a 90% Cost A: Utilization Rate Utilization Rate Total Rs 440,000 RS 410,000 Per hour varialle RS 5.50 7 5-50 Cost B: Total RS 1,944,000 fined Per hour RS 10.80 RS 10.80 variable Cost C: Total Per hour Rs 680,000 Rs 1,330,000 Rs 8.50 RS 7.39 SALAMAT uses the high-low method to analyze cost behavior. Required: 13 50,080 - 6809 b) a) Classify each of the costs as being either variable, fixed, or serivariable. Calculate amounts for the two unknowns in the preceding table. Calculate the total amount that SALAMAT would expect at a 75% utilization rate for Cost A. (50 320) Cost B, and Cost C. d) Develop an equation that SALAMAT can use to predict total cost for any level of hours within it's range of operation