Group case 2

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Part B: Cost-Volume-Profit AnalysisBelli-Pitt, Inc, produces a single product. The results of the company’s operations for a typical month aresummarized in contribution format as follows:Sales…………………………….. $540,000Variable expenses………….. 360,000Contribution margin ………. 180,000Fixed expenses ……………… 120,000Net operating income …….. $ 60,000The company produced and sold 120,000 kilograms of product during the month. There were nobeginning or ending inventories.Required:a. Given the present situation, compute1. The break-even sales in kilograms.2. The break-even sales in dollars.3. The sales in kilograms that would be required to produce net operating income of$90,000.4. The margin of safety in dollars.b. An important part of processing is performed by a machine that is currently being leased for$20,000 per month. Belli-Pitt has been offered an arrangement whereby it would pay $0.10royalty per kilogram processed by the machine rather than the monthly lease.1. Should the company choose the lease or the royalty plan?2. Under the royalty plan compute break-even point in kilograms.3. Under the royalty plan compute break-even point in dollars.4. Under the royalty plan determine the sales in kilograms that would be required toproduce net operating income of $90,000.