Campfire Products sells camping equipment. One of the companys products, a camping lantern, sells for $100 per unit. Variable expenses are $65 per lantern, and fixed expenses associated with the lantern total $140,000 per month.

Required:

a. Compute the companys break-even point in number of lanterns and in total sales dollars.

b. At present, the company is selling 8,000 lanterns per month. The sales manager is convinced that a 10% reduction in the selling price will result in a 25% increase in the number of lanterns sold each month. Prepare two contribution income statements, one under present operating conditions, and one as operations would appear after the proposed changes. Show both total and per unit data on your statements and determine if the proposed changes will be beneficial to the companys net operating income.

c. Refer to the data in (c) above. How many lanterns would have to be sold at the new selling price to yield a minimum net operating income of $72,000 per month?