Mundial Nails produces a famous nail polish with a unique glossy feature and sells it for $25 per unit. The operating income for 2017 is as follows:

Required

1. Replacing a portion of its variable labor with an automated machining process. This would result in a  25% decrease in variable manufacturing costs per unit, but a 20% increase in fixed costs. Sales would  remain the same.
2. Spending $30,000 on a new advertising campaign, which would increase sales by 20%.
3. Increasing both selling price by $5 per unit and raw-material costs by $3 per unit by using superior  quality raw materials in producing its nail polish. The higher-priced nail polish would cause demand to drop by approximately 20%.
4. Adding a second manufacturing facility that would double Mundial Nails’ fixed costs, but would increase  sales by 60%.
Evaluate each of the alternatives considered by Mundial Nails. Do any of the options meet or exceed Mundial’s targeted increase in income of 25%? What should Mundial Nails do?

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Sales revenue Raw materials Variable manufacturing costs Other variable costs Contribution margin Fixed cost Operating income Per unit €25 €5 €4 €6 €10 Total €750,000 €150,000 €120,000 €180,000 €300,000 €174,000 €126,000