Arrow Products typically earns a contribution margin ratio of 25 percent and has current fixed costs of $80,000. Arrow's general manager is considering spending an additional $20,000 to do one of the following:

1.	Start a new ad campaign that is expected to increase sales revenue by 5 percent.
2.	License a new computerized ordering system that is expected to increase Arrow's contribution margin ratio to 30 percent.

Sales revenue for the coming year was initially forecast to equal $1,200,000 (that is, without implementing either of the above options).

a-1	Compute the projected operating income for each option? (Omit the "$" sign in your response.)

Operating income
Ad Campaign	$
Ordering System	$

a-2	For each option, how much will projected operating income increase or decrease relative to initial predictions?

Thus projected operating income will by $ if the ad campaign is chosen.

Thus projected operating income will by $ if the ordering system is chosen.

b.	By what percentage would sales revenue need to increase to make the ad campaign as attractive as the ordering system? (Omit the "%" sign in your response.)

Percentage increase

%