Budget Mowing manufactures a low cost ride-on lawnmower for the Australian market, the Quickmow. Current annual sales are 600 mowers and they sell for $1,000 each. Staff salaries are $101,000 per annum and the manufacturing shed rental and other overheads such as air conditioning are $19,000 per annum. On average parts for a mower cost $500 and other variable costs of manufacture are $100 per mower. 

Required:

 1. What is the contribution margin per mower sold? 

 2. How many mowers need to be sold per year to break-even?

 3. Given current annual sales, what would the annual profit/loss be?

 4. Draw a Cost-Volume-Profit graph showing total revenue and total costs, fixed costs, profit and loss areas, and clearly showing the break-even point in units and dollar revenue.

5. The owner of Budget Mowing is considering spending $20,000 on an advertising campaign for the year which it is expected will increase sales by 55 mowers. Is the additional spending worthwhile (show calculations to support your answer)?