A). Joes Sportsware Co. wants to see what the impact of some changes will be on the operating income of the business. They would like to increase the contribution margin by 10% per unit and the fixed costs would be decreased by 20%.

Last year they sold 3.000 units for $210,000. The variable cost was $50 per unit and the Fixed costs were $25,000.

If the proposed changes are made, what will be the amount of increase or decrease to the operating income. Prepare you answer using the incremental approach. (3 marks)

B) Olympic Corporation produces and sells two products A-line and Graphic. The information for the 2 products for one month is:

	A-line	Graphic
Selling Price per Unit	$150	$ 165
Variable Production Costs per unit	$120	$ 126
Variable Selling Expense per Unit	$ 16	$ 13
Expected Monthly Sales in Units	600	1,200
Total Monthly Fixed Cost	$15,000

1. Calculate the operating income for the company for one month. (5 marks)

A chart has been provided to assist with calculations.

A-line Graphic Olympic Co

Question 2-B (continued)

1. Calculate the overall contribution margin ratio for the company based on the above sales mix. Use 1 decimal place if necessary (ie. 99.9%) (2 marks)

1. Given the above sales mix, calculate the break-even point in sales dollars. (2 marks)

1. If the expected monthly sales in units were divided equally between the two models (900 of each product), where would the break-even level of sales be

compared to the expected sales mix above ? (higher, lower, the same, can't tell?).

EXPLAIN.