Required:

$1.$ Compute the company's contribution margin $($CM$)$ ratio and its break$-$even point in dollar sales $(3$

marks$)$

$2.$ Assume this year's total sales increase by $$50,000.$ If the fixed expenses do not change, how much

will operating income increase? $(1$ mark$)$

$3.$ Assuming that the operating results for last year were as above: $(3$ marks$)$

the degree of operating leverage based on last year's sales $($Round your answer to $2$ decimal places$)$

b$.$ The president expects sales to increase

by $20\%$ next year. Using the degree of operating leverage from last year, what percentage increase in

operating income will the company realize this year? Calculate the dollar increase in operating

income.

$4.$ The sales manager is convinced that a $10\%$ reduction in the selling price, combine with a $$32,000$

increase in advertising, would increase this year's unit sales by $20\%.(4$ marks$)$ a$.$ If the sales manager

is right, what would this year's contribution margin if his ideas are implemented?

b$.$ If the sales manager's ideas are implemented,

how much will operating income increase or decrease over last year? $($use incremental approach$)$

$5.$ The president does not want to change the selling price. Instead, he wants to increase the sales

commission by $$1$ per unit. He thinks that this move, combined with some increase in advertising,

would increase this year's unit sales by $20\%.$ How much could the president increase this year's

advertising expense and still earn the same $$52,000$ operating income as last year? $(2$ marks$)$

a$.$ Compute