0.1 Fico Diana has recently opened music instrumental shop in Sydney, Australia, a store that specializes in customized musical instruments. Fico has just received a degree in business, and she is anxious to apply the principles she has learned to her business. In time, she hopes to open a chain of music instrumental shops. As a first step, she has prepared the following analysis for her new store $40 16 $24 Sales price per instrument Variable expenses per instrument Contribution margin per instrument. Fixed expenses per year: Building rental Equipment depreciation Selling Administrative Total fixed expenses. $15,000 7.000 20.000 18,000 $60,000 Required: (Marks 10) 1. How many musical instruments must be sold each year to break even? What does this represent in total sales dollars? 2. Prepare a CVP graph or a profit graph for the store from zero up to 4,000 instruments sold each year. Indicate the break-even point on your graph. 3. Fico has decided that she must eam at least $18,000 the first year to justify her time and effort. How many units of instruments must be sold to reach this target profit? 4. Fico now has two salespersons working in the storeone full time and one part time. It will cost her an additional $8,000 per year to convert the part-time position to a full-time position. Fico believes that the change would bring in an additional $25,000 in sales cach year. Should she convert the position? Use the incremental approach. (Do not prepare an income statement.) 5. Refer to the original data. During the first year, the store sold only 3,000 instruments and reported the following operating results: Sales (3,000 units) $120,000 Variable expenses 48.000 Contribution margin 72.000 Fixed expenses .. 60,000 Net operating income $ 12,000 a. What is the store's degree of operating leverage? b. Fico is confident that with a more intense sales effort and with a more creative advertising program she can increase sales by 50% next year. What would be the expected percentage increase in net operating income? Use the degree of operating leverage to compute your