Problem 1: Assume that Sony and Microsoft both plan to introduce a new hand-held video game. Sony plans to use a heavily automated production process to produce its product while Microsoft plans to use a labor-intensive production process. The following revenue and cost relationships are provided: Sony Game Microsoft Game Selling price per unit $100 $100 Variable costs per unit Direct materials $18.00 $18.00 Direct labor 5.00 20.00 Overhead 5.00 20.00 Selling and administrative 2.00 2.00 Annual fixed costs Overhead $400,000 $160,000 Selling and administrative 90,000 90,000 Required: a) Compute the contribution margin per unit for each company. b) Prepare a contribution income statement for each company assuming each company sells 8,000 units. c) Compute each firm's net income if the number of units sold increases by 10% d) Which firm will have more stable profits when sales change? Why