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Heaven Company prepared the following anticipated income statement for the next fiscal year ending in December, 2016:

Sales $600,000

Cost of Goods Sold:

Direct Materials $60,000

Direct Labor 45,000

Variable Overhead 37,500

Fixed Overhead 50,000 192,500

Gross Profit ` $407,500

Selling & Administrative Cost:

Variable $ 7,500

Fixed 20,000 $ 27,500

NET INCOME $380,000

Expected units to be sold: 20,000

Part 1: Reconstruct the above functional format Income Statement to reflect a direct costing (contribution) format income statement.

Part 2: Calculate the expected contribution margin in dollars per unit AND the contribution margin ratio.

Part 3: How many units must Heaven sell next year in order to break even?

Part 4: How many sales dollars must Heaven earn in order to break even next year?

Part 5: Based upon the above calculations, what is the margin of safet for Heaven expressed in dollars AND percent?

Part 6: What is the expected oerating leverage factor for Heaven, using the information derived in question 1A?

Part 7: Based upon your calculations in part (F), if Heaven's expected sales ill increase by 20%, by what percentage will net income increase?

Part 8: Go back to the orginial information given in the problem. Assume that Heaven's variable costs will increase by 20%, fixed costs will increase by $15,000, and selling price will increase to $22 per unit, calculate the new breakevenn pointy in sales units and sales dollars.

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