SMKI Inc. Projected Contribution Margin Income Statement For the Year Ended December 31, 2023

Sales (14,000 units) 480,000

Less: variable costs.

Variable manufacturing costs 120,000

Variable selling costs 72,000

Total variable costs 192,000

Contribution margin 288,000

Less: fixed costs

Fixed manufacturing costs 170,000

Fixed selling costs 30,000 Fixed administrative costs 40,000

Total fixed costs 248,000

Operating income 48,000

(A) What is the breakeven point in units?

(B) The sales manager is considering launching an advertising campaign that would cost $30,000 and is expected to increase sales by 2,000 units. Assuming the sales manager's estimates are correct, should the company proceed with the advertising campaign? If the company proceeds with the advertising campaign, by how much would operating income increase or decrease?

(C) Break even point. What is meant by the term? Why should a manager be concerned about the break-even point?