Fox Company developed the following income statement using a contribution margin approach.

The projected income statement was based upon sales of 20,000 units. Fox has the capacity to produce 25,000 units during the year.

1. Determine breakeven point in units.
2. The sales manager believes the company could increase sales by 3,000 units if advertising expenditures are increased by $30,000. Determine the effect on income if the company increases advertisingexpenditures.

FOX COMPANY PROJECTED INCOME STATEMENT FOR THE YEAR ENDING DECEMEBER 31, 2004 Revenues Variable Costs: Variable selling costs S400,000 Variable manufacturing costs $100,000 60.000 Total Variable Costs 60.000 $240,000 Contribution Margin Fixed Costs: T. S110.000 70,000 Fixed manufacturing costs Fixed selling and administrative costs Total Fixed Costs Incone 180.000 S60,000