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Kelly Company’s most recent contribution format income statementis shown below:

	Total			Per Unit
Sales (50,000 units)	$	700,000		$	14
Variable costs		300,000			6
Contribution margin		400,000		$	8
Fixed costs		240,000
Operating income	$	160,000

Required:

Prepare a new contribution format income statement with a perunit column under each of the following conditions (consider eachcase independently):

1. The selling price increases by $1 per unit, fixed costsincrease by $20,000, and the number of units sold decreases by 10%.Would this change be beneficial to the company? Briefly explain.( 4 marks)

2. Return to the original data. Variable costs increase by 60cents per unit, the selling price increases by 15%, and the numberof units sold decreases by 15%. Would this change be beneficial tothe company? Briefly explain. ( 4 marks)

3. Return to the original data. The selling price decreases by $2per unit, fixed costs decrease by $30,000, and the variable costsper unit increases by 10%. Would this change be beneficial to thecompany? Briefly explain. ( 4 marks)

4. Return to the original data. The number of units sold decreasesby 5%, fixed costs increase by 10%, and the variable costs per unitdecreases by $4 per unit. Would this change be beneficial to thecompany? Briefly explain. ( 4 marks)

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