(Incremental analysis) Fair Winds Co. makes portable hair dryers. You have been asked to predict the potential effects of some proposed company changes. The following information is available:

The selling price is $23.50 per unit, and expected sales volume for the cur¬ rent year is 150,000 units. Following are some changes proposed by various members of the company.
1. Engineers suggest that adding a radio headset to each unit at a cost of $3.60 would increase product sales by 20 percent.
2. The sales manager suggests that a $130,000 increase in advertising will increase sales by 15 percent.
3. The sales force believes that lowering the price by 5 percent will in¬ crease demand in units by 10 percent.

a. Compute the current break-even point in units and dollars.

b. Compute the current margin of safety in dollars, in units, and as a per¬ centage.

c. Compute the independent effects on profit and dollar break-even point of each of the suggestions. For each proposal, advise company manage¬ ment about acceptability.

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Variable costs per unit Direct material $4.60 Direct labor 3.25 Production overhead 2.15 Selling expenses 1.15 Administrative expenses 0.75 Annual fixed costs Production overhead $300,000 Selling 240,000 Administrative 120,000