Budgeting affects the planning, directing, and controlling functions of management. LearnCo wishes to determine the sensitivity of some of its budget values to changes in the economy.

Using the information on the completed budget panels, answer the following questions. Consider each question separately, assuming that all other data remains the same, including the level of production of each model.

1. LearnCo believes that sales of the Deluxe Abacus model may decrease in 20Y2. If Deluxe abacus sales are zero, what will be the effect on LearnCos income before income tax? For simplicity, ignore any change in Cost of Goods Sold.

LearnCo will have a net loss before income tax if it sells zero Deluxe Abacus units in 20Y2.

LearnCo will still have positive income before income tax if it sells zero Deluxe Abacus units in 20Y2.

If LearnCo sells zero Deluxe Abacus units in 20Y2, it will break even (i.e., the company will have zero income before income tax).

2. LearnCo's vendor for bead packages is expected to double its price per package of beads. If this occurs, what will be the effect on LearnCos income before income tax?

LearnCo will have a loss before income tax if the price for bead packages doubles.

If the price for bead packages doubles, LearnCo will break even (i.e., the company will have zero income before income tax).

LearnCo will still have positive income before income tax if the price for bead packages doubles.

3. LearnCo is aware that its labor prices for the Gluing part of the manufacturing process may increase to $15.00 per hour due to changes in minimum wage laws in its state. If this occurs, what will be the effect on LearnCos income before income tax?

LearnCo will still have positive income before income tax if Gluing labor costs increase to $15.00 per hour.

If Gluing labor costs increase to $15.00 per hour, LearnCo will break even (i.e., the company will have zero income before income tax).

LearnCo will have a loss before income tax if Gluing labor costs increase to $15.00 per hour.

4. LearnCos controller believes that the company can decrease its selling expenses by 10% and its administrative expenses by 15%. How much would income before income tax increase if these expense cuts are implemented? Round your answer to the nearest dollar.