Artistic Woodcrafting Inc. began several years ago as a one-person, cabinet-making operation. Employees were added as the business expanded. Last year, sales volume totaled $850,000. Volume for the first five months of the current year totaled $600,000, and sales were expected to be $1.6 million for the entire year. Unfortunately, the cabinet business in the region where Artistic is located is highly competitive. More than 200 cabinet shops are all competing for the same business.

Artistic currently offers two different quality grades of cabinets: Grade I and Grade II, with Grade I being the higher quality. The average unit selling prices, unit variable costs, and direct fixed costs are as follows:

	Unit Price	Unit Variable Cost	Direct Fixed Cost
Grade 1	$3,400	$2,686	$95,000
Grade 2	1,600	1,328	95,000

Common fixed costs (fixed costs not traceable to either cabinet) are $35,000. Currently, for every three Grade I cabinets sold, seven Grade II cabinets are sold.

AREAS IS BOLD ARE NEEDED

Sales mix changes to 50% grade 1 and 50% grade 2
Sales increase by 30% to $1,300,000
Let X =packet of grade 1 and grade 2 packages
sales last 7 months=Sales mix grade 1*X*(price grade 1)+Sales mix grade 2*X*(price grade 2)
			Unit Sales for Package			Unit Sales Grade 1			Unit Sales Grade 2
Change in CM=CM grade 1*(new units grade 1-old units grade 1)+CM grade 2*(new units grade 2-old units grade 2)
				Change in CM
Change in fixed costs over the last 7 months
change in operating income=change in CM-change in fixed costs
				Change in operating income