Marilyn's specialties produces high quality quilts. Labor and materials are particularly high. The following is an income statement for last year.

1. What are Marilyn's break-even points in units?
2. How many quilts must Marilyn sell to earn pre-tax operating profit of $40000?
3. Marilyn suspects that she could replace some of the seamstress's labor with machines. If she were to do the all of the following changes are expected to occur.
€¢ Increased fixed manufacturing costs by $100000 per year
€¢ Increase variable overhead costs by $20 per quilt
€¢ Decreased direct labor by $150 per quilts
€¢ Increased sales units by 25%
What will Marilyn's operating income be if she replaces the seamstresses?

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Sales (1.000 units) $520,000 COGS Direct materials $190,000 Direct labor 200,000 Variable overhead 91.000 Fixed overhead (5521.000) 40,000 Gross margin ($1.000) Selling and administrative expenses Variable $14,000 Fixed 20,000 1$34,000) Operating Income 1S35.000)