Please complete this problem with explanations........................................................................................................................................................................................................................................

Problem 4-19 Basic Cost-Volume-Profit Analysis [LO1, LO3, LO4, LO5, LO6] Stratford Company distributes a lightweight lawn chair that sells for $25 per unit. Variable expenses are $9 per unit, and fixed expenses total $160,000 annually. Results for last year are as follows: Sales (18,000 units) Variable expenses $450,000 162,000 Contribution margin Fixed expenses 288,000 160,000 Operating income $128,000 Required: 1. Calculate the company's CM ratio and its break-even point in sales dollars and in units. CM ratio % Break-even point in sales dollars Break-even point in units 2. If sales increase by $52,000 during the coming year due to increased demand, by how much should operating income increase? Use the incremental approach in preparing your answer. Operating income increases by = 3a. Refer to the original data. The sales vice-president is convinced that a 15% decrease in the selling price, combined with a $170,000 increase in marketing expenditures, would increase annual unit sales by 80%. Prepare a new contribution format income statement assuming these changes occur. (Round "Per Unit" answers to 2 decimal places.) Stratford Company Contribution Margin Income Statement Proposed = Units Total Per Unit 0 Net operating income $ 3-b. Should the company proceed with the changes? Yes No 4. Refer to the original data. The president feels that it would be unwise to change the selling price. Instead, she wants to increase the sales commission by $3 per unit. She thinks that this move, combined with some increase in advertising, would increase sales to 36,000 units compared to 18,000 last year. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach. The amount by which advertising can be increased is = 0 0.00