The following monthly data in contribution format are available for the X Co$.$ and its only product:

Total

Sales...................................................................... $$83,700$

Variable expenses.............................................. $32,700$

Contribution margin.......................................... $51,000$

Fixed expenses.................................................... $40,000$

Net operating income........................................ $$11,000$

The Company is currently using $60\%$ of its available capacity selling $600$ units of product per month.

Required: $($each point is separate$)$

a$.$ Management is contemplating the use of plastic gearing rather than metal gearing in its product. This change would reduce variable expenses by $$8$ per unit. The company's sales manager predicts that this would reduce the overall quality of the product and thus would result in a decline in sales to a level of $500$ units per month. Should this change be made?

b$.$ What is the sales volume required to achieve a target profits margin $20\%?$

c$.$ Management wants to increase sales and feels this can be done by cutting the unit selling price by $$20$ and increasing the advertising budget by $$30,000$ per month. Management believes that these actions will increase unit sales by $40\%.$ Should these changes be made?

d$.$ An order has been received from an overseas customer for $400$ units to be delivered this month at a special discounted price of $$76.$ This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. If the offer is accepted, $30\%$ of variables expenses will not be avoided. By how much would this special$-$order increase $($decrease$)$ the company's net operating income for the month?

e$.$ X Co$.$ is expecting to experience severe financial difficulties and has applied for a large guaranteed loan. As a condition for obtaining the guarantee, the Bank mandates that the company significantly reduce its break$-$even point. Highlight and discuss with examples all possible strategies and implications a company might consider to meet required conditions $(500$ words max$).$