5. Refer to the original data; management is considering using higher-quality components that would increase the variable cost by $2 per unit. The marketing manager believes that the higher quality product would increase sales by 10%. Should the higher quality components should be used? with the

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Question 2: Pringle Company distributes a single product, the company's sale and expenses for a recent month follow: Total Per Unite Sales 225,000 Variable expenses..... 135.000 Contribution margin ... 90,000 Fixed Expenses ........ 75.000 Net Operating Income 15.000 75 The company is selling 3,000 units per month. Required: 1. What is the monthly break-even point in units and in sales dollars? 2. How many units would have to be sold each month to earn a target profit of 27,000? 3. Refer to the original data; compute the company's margin of safety in dollars. 4. What is the company's CM ratio, if the monthly sales increase by $ 120,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income increase? 5. Refer to the original data; management is considering using higher quality components that would increase the variable cost by $ 2 per unit. The marketing manager believes that the higher quality product would increase sales by 10%. Should the higher-quality components should be used? 6. What is the margin of safety in percentage? 7. What is a degree of operation leverage? 8. Estimate the impact on net operating income of a 6% increase in sales