2. Ensco Lighting Company has fixed costs of $100,000, sells its units for $28, and has variable costs of $15.50 per unit.

a. Compute the break-even point.

b. Ms. Watts comes up with a new plan to cut fixed costs to $75,000. However, more labor will now be required, which will increase variable costs per unit to $17. The sales price will remain at $28. What is the new break-even point?

c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?

d. Calculate the DOL at 20,000 units sold at the Leveraged Structure (FC $100,000) and the conservative (FC $75,000) and interpret the results. By how much (in %) will the operating profit increase if the units sold increase from 20,000 to 24,000 under both the leveraged and conservative structure.