Retirement Investors is opening an office in Denver. Fixed monthly costs are office rent ( \(\$ 2,500\) ), depreciation on office furniture ( \(\$ 260\) ), utilities ( \(\$ 380\) ), special telephone lines ( \(\$ 500\) ), a connection with an online brokerage service ( \(\$ 640\) ), and the salary of a financial planner ( \(\$ 3,400\) ). Variable costs include payments to the financial planner ( \(10 \%\) of revenue), advertising ( \(5 \%\) of revenue), supplies and postage ( \(2 \%\) of revenue), and usage fees for the telephone lines and computerized brokerage service ( \(3 \%\) of revenue).

Requirements 

1. Use the contribution margin ratio CVP formula to compute the investment firm's breakeven revenue in dollars. If the average trade yields \$400 in revenue for Retirement Investors, how many trades must be made to break even?

2. Use the income statement equation approach to compute dollar revenues needed to earn monthly operating income of \(\$ 3,840\).

3. Graph Retirement Investors' CVP relationships. Assume that an average trade yields \(\$ 400\) in revenue for the firm. Show the breakeven point, the sales revenue line, the fixed cost line, the total cost line, the operating loss area, the operating income area, and the sales in units (trades) and dollars when monthly operating income of \(\$ 3,840\) is earned. The graph should range from 0 to 40 units.

4. Suppose that the average revenue Retirement Investors earns decreases to \(\$ 320\) per trade. How does this affect the breakeven point in number of trades?