ABC Firm uses variable costing for internal decision making purposes. In the month of September, the firm produced 2,000 units and sold 1,500. There was no beginning inventory. The income statement follows:

Sales (1,500 units) $67,500

Variable Costs:

Manufacturing 15,000

Selling and Administrative 14,250 29,250

Contribution Margin $38,250

Fixed Costs:

Manufacturing 12,000

Selling and Administrative 13,000 25,000

Net Income $13,250

1. Prepare a traditional income statement assuming absorption costing.

1. For the month of October, the firm made a few changes. Sales people were offered an incentive of $1 per unit for every unit they sold. The product was redesigned to be more visually attractive. This increased variable manufacturing costs per unit by 5% and added $3,000 to fixed costs. During October, the firm produced 10,000 units and sold 9,500. Prepare the contribution format income statement for October. For purposes of this problem, you may ignore beginning inventory--do the computation as if there were no units in beginning inventory.

1. What was the firms break even point in September? You may provide your response either in units or sales dollars.

1. What was the firms break even point in October? Use the same measure of break even as you used in part c.