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te with security updates, fixes, and improvements, choose Check for Updates. Required: (1) Compute 2020 operating income on a contribution margin income statement if Colour Zone acquires the additional capacity and produces and sells 500 000 gallons. Assume that Colour Zone switches to plan B (a salary of $20 000 each and commission of $0.20 per gallon) to pay sales person. (b) In 2019, Colour Zone operated at full capacity of 400 000 gallons. Each sales person was paid according to Plan A. The average sale price was SIO per gallon, and the average variable cost (excluding commission) was $6 per gallon. Fixed expenses totalled S1 000 000. Garcia believes that his sales force can sell 500 000 gallons in 2020 and every year thereafter if his company can produce them. He estimates that an additional committed fixed cost of $200 000 would be required to provide another 100 000 gallons of capacity. (b) Statement of Profit (Existing Capacity): Particulars S S Selling Price 10 Less: Variable Costs 6 Commission Cost as per Plan A 0.40 Total Variable Cost 6.40 Contribution per unit 3.60 Number of Units 400,000 Total Contribution (400,000*3.60) 1.440,000 Less: Fixed Costs 1,000,000 (11) Repeat the above requirement (1), assuming that Colour Zone continues to pay compensation according to plan A (a straight commission of S0.40 per gallon). (iii) At production and sales volume of 500 000 gallons per year, which employee compensation plan should the company use. Why? 440,000 Profit Statement of Profit (Increased Capacity: 6.40 Particulars Selling Price Less: Variable Costs Commission Cost as per Plan A Total Variable Cost Contribution per unit Number of Units Total Contribution (500,000 3.60] Less: Fixed Costs (1,000,000-200,000) Profit Increase in Profit - 600,000 - 440,000 - $160,000 3.60 500,000 1,800,000 1.200,000 600,000 English (Australia)

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