Amos Electric Supplies manufactures relays and currently sells 200,000 units annually to producers of electronic equipment. John Harris, president of the company, anticipates a 20% st per unit of direct labour on January 1 of next year. He expects all other costs and expenses to remain the same. Harris has asked you to assist him in developing the information necessary to prepare a reasonable product strategy for next year. Being that volume is the primary factor affecting costs and expenses, semi variable costs have been separated into their fixed and variable segments. Beginning and ending inventories remain at a level of 3,000 units. Current plant capacity is 210,000 units. The current-year data assembled is as follows: ..... $15 Sales price per unit.. Variable costs per unit: Direct materials. ...............................$3 Direct labour. ................. $1 Variable manufacturing overhead and selling and administrative expenses...$2 $6 Fixed costs........ ...................... $1,000,000 Current opearting income= Revenue 3000000 Less: Variable cost 80000 Variable Overhead 400000 Fixed cost 1000000 1480000 Operating income 1520000 5. If the sales price remains the same and the 20% wage increase goes int effect, how many units must be sold to maintain the current operating income? 6. Harris believes that an additional $500,000 investment in machinery (to be depreciated at 20% annually) will increase present production capacity (210,000 units) by 5%. If all units produced can be sold at the present price of $15 per unit and the wage increase goes into effect, how would the estimated operating income before capacity is increased compare with the estimated operating income at full capacity before and after the expansion. 7. Prepare a Cost-Volume-Profit graph before and after expansion. 8. Write a brief report providing your opinion whether the company should or should not go through with the expansion