1. Tess's Test Prep services school districts that wish to assess students' reading and mathematical abilities. Last year Tess evaluated 60,000 math tests and 20,000 reading tests. An income statement for the year follows. Total Total Per Unit Total Per UnitCompany $1,920,000 1.200,000 720,000 360,000 360,000 $1,200,000 $20 $720,000$36 Sales Revenue Variable Expenses840,000 14 Contribution Margin 360,000 $6 360,000 $18 Fixed Expenses 360,000 18 Operating Income Required a. What is Tess'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 Tess's new pricing and demand structure. What will be Tess's breakeven point in sales dollars if this change is implemented? Do you recommend that Tess make the change? c. Tony Tank, president of Rambo Recreation Products, Inc. is concerned about declines that he is beginning to see in the demand for the company's line of old school log basketballs as new competitors enter the market. At ta current contribution margin of $8, the company must sell 81,250 basketballs to generate the desired $200,000 in annual operating income. Based on a recent market research report, Anthony thinks the company can expect annual sales of only 65,000 basketballs in the future. 2. Required a. What is Tony's current level of fixed expenses? b. What is Tony's current breakeven point