Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows:

A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer?
B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer?
C. What would be your recommendation to Shonda & Shonda regarding this purchase?

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Units sold Sales price per unit Variable cost per unit Fixed costs Current 1,400 225 145 Sales Variable costs Contribution margin Fixed costs Net income (loss) $ LA LA LA $ $ 52,000 Break-even (in units) Contribution margin ratio $ Break-even (in dollars) 650 0.36 $146,250 LA $315,000 $203,000 $112,000 $ 52,000 $ 60,000