Breckenridge Manufacturing produces a snowboard. Prices and costs are as follows:

Selling price Variable costs

Snowboard $500 $300

Breckenridge incurs $12,500 in monthly fixed costs related to its ski operations. Breckenridge is

currently earning $20,000 per year in operating income

1. Compute the breakeven point in terms of number snowboards that must be sold per year.

2. Breckenridge's management requires operating income of $30,000 per year. How many

snowboards must Breckenridge sell per year to achieve this goal? How many additional

snowboards is this compared to what Breckenridge is currently selling?

3. If Breckenridge can reduce its fixed costs to $10,000 per month, what total sales dollars are

needed to achieve the target operating income?

4. Breckenridge wants to run an advertising campaign costing $10,000 related to the sale of the

snowboard. What quantity of sales are needed to pay for the advertising campaign and to

achieve the $30,000 in target income required by management? If Breckenridge can

increase sales 15% due to the advertising campaign, should it run it?

5. Explain in paragraph

A. Breckenridge's current situation;

B. What you think Breckenridge should do to increase its operating income

(compare 3 and 4). Explain why you chose your strategy.