Problem 5-29 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5, LO5-7, LO5-8]

Problem 5-29 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5, LO5-7, LO5-8] Safety [LO5-4, L Morton Company's contribution format income statement for last month is given below. Sales (48,000 units $30 per unit) Variable expenses $1,440,000 1,008,000 Contribution margin Fixed expenses 432,000 345,600 Net operating income $ 86,400 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits