Norman Borlaug has a wheat farm which produces 20,000 units andtypically can produce them for $0.58 each with fixed costs of$3,000. The current market price for wheat forces them to selltheir units for $0.71 each. Because of the tough market conditions,one of their competitors is looking to exit the business andinstead rent their land out for $4,500 a month. Borlaug believeswith the additional land they could produce and sell an extra80,000 units each with the same variable cost of $0.58 per unit.However by creating these additional units and adding supply to themarket, the company would then sell all the wheat it produces fromboth farms for $0.68 per unit.

1. Create a contribution income statement which can be used todetermine whether Borlaug needs the second farm in order to turn aprofit.

2. Create a CVP graph for profitability levels for every 10,000units from 0 to 100,000 units with the appropriate title and axeslabels added

3. Determine the number of units they would need to break-even.Save and submit the spreadsheet with that number entered into theunits sold input.

Notes: keep in mind that now the revenues and fixed expenses arechanging based on whether we need the second farm, meaning that youwill need an IF statement for both the revenues and fixed expensesof the contribution income statement, but not the variableexpenses. In addition, when creating the revenues and expensescolumns to make the CVP graph, both columns will take IF statementsas, once again, the revenues and fixed expenses both change if weneed two farms. If everything is set up correctly, the break-evenshould be 75,000 units. As always, feel free to email me with anyquestions and best of luck!