A company sells a product for $40.00 per unit. Variable expenses are $20.00 per unit, and fixed expenses total 200,000 per year. Its operating results for last year were as follows:

Sales: $1,000,000

Variable Expenses: $500,000

Contribution Margin: $500,000

Fixed Expenses: $200,000

Net Operating Income: $300,000

1. Assume this year's unit sales and total sales increase by 52,000 units and $2,080,000, respectively. If the fixed expenses do not change, how much will net operating income increase?

2. The sales manager is convinced that a 15% reduction in selling price, combined with a $76,000 increase in advertising, would increase this year's unit sales by 25%.

a. If the sales manager is right, what would be this year's net, operating income if his ideas are implemented?

b. If the sales managers ideas are implemented, how much will net operating income increase or decrease over the last year?

3. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.60 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $300,000 net operating income as last year?