2. Sanafi Company manufactures a single product. In the month of August, the company manufactured 13,000 units and sold all of them for a total of $845,000. Variable costs related to manufacturing is $11.50 and variable costs related to selling & admin is another $4. The total fixed expense for the company is $345,000.

i. How many units of product the company must sell to reach break- even point? What will be the break- even point in sales dollars? (6 marks)

ii. Prepare a Contribution Margin format of Income Statement for Sanafi Company. (4 marks). iii. The manager of Sanafi Company predicts that by decreasing selling price per unit by 5%, and using higher quality raw material (which will in turn increase raw material cost per unit by $2),

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the unit sales will increase by 2,000 units. Should the company go with the managers decision? Comment on your answer. (6 marks)

iv. The manager of Sanafi Company estimates that by providing a sales commission of $1 per unit, and spending an additional $5,000 on advertising the products each month, the unit sales will increase by at least 12%. Should the company go with the managers decision? Comment on your answer. (6 marks)

v. How many units of products the company must sell in order to attain a profit of $55,000? (3 marks)

vi. Calculate the margin of safety (in %) for Sanafi Company. (3 marks).

vii. Assume that for a lower than usual demand, the sales of Sanafi Company has decreased by 5000 units. By how much the fixed cost must be reduced to, in order to maintain the current net income/profit? (5 marks)