Abado Profiles provides testing services to school districts that wish to assess students reading and mathematical abilities.

Abado Profiles provides testing services to school districts that wish to assess students’ reading and mathematical abilities. Last year Abado evaluated 60,000 math tests and 20,000 reading tests. An income statement for last year follows.

Required
a. What is Abado's breakeven point in sales dollars?
b. In an effort to raise the demand for reading tests, managers are planning to lower the price from $36 per test to $20 per test, the current price of the math test. They believe that doing so will increase the demand for reading tests to 60,000. Prepare a contribution format income statement reflecting Abado's new pricing and demand structure.
c. What will be Abado's breakeven point in sales dollars if this change is implemented? Do you recommend that Abado make thechange?

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Math Testing Reading Testing Total Sales revenue Variable expenses Contribution margin Fixed expenses Operating income Tota Unit Tota PUnit Company $1,200,000 $20 $720,000 $36 $1,920,000 360,000 $6 $360,000 $18 14 18 840,000 360,000 1,200,000 720,000 360,000 $ 360,000 6