1. ). Applehead Technology is a company that purchases a device called the EyePod from a supplier and then sells the devices to retail customers. Applehead ships to its customers FOB shipping point. Applehead is seeking to increase its operating profit as much as possible. If it makes no changes in its operations, the company expects the following for the coming year.

# of units sold 30,000

Price $300 per unit

Shipping costs $ 2 per unit

Cost of merchandise $160 per unit

Rent of facilities and equipment $ 1,000,000

Managerial and administrative salaries $ 1,500,000

Knowing that the company wishes to increase its operating profit, Maria Garcia, the marketing manager, says I think we should make 2 changes: first, reduce our price to $290 and, second, we should begin to ship FOB destination. If we take these actions, I estimate we will increase the number of units sold to 32,500.

1. On the spreadsheet provided, prepare contribution margin income statements to analyze each of the 2 possibilities for the coming year, namely (14 Points)
2. Applehead makes no changes
3. Applehead adopts Garcias proposal
4. Given Appleheads goal of maximizing its operating profit, based solely on your calculations, should it make the change that the marketing manager suggests? Why or why not? Answer in about a sentence in the space provided on the spreadsheet. (6 points)

For question #2a
					Adopt Marketing
	Make no changes		Managers Proposal
	Total		Computation		Total		Computation
Sales
Variable Costs
Contribution Margin
Fixed Costs
Operating Profit
For question #2b:

c. If the company does not adopt Garcias proposals, how many EyePods (units) would it need to sell in order to break even? Show all work in the space provided. (5 points)

d. If the company did not adopt Garcias proposals and actually sells the 30,000 units at $300 each, what is its margin of safety, expressed as a percent? Show all work in the space provided. (round to second decimal places) (5 points)