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Carla Vista has proposed a plan to get the partnership out of the red and improve its profitability. She feels that the quality of the
Carla Vista has proposed a plan to get the partnership out of the red" and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Carla Vista estimates that sales volume will increase by 25%. Compute the net income under Carla Vista's proposal and the break-even point in dollars. (Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to 0 decimal places, e.g. 2,520.) Amount Net income $ 112500 Break-even point $ Carla Vista and Paul Company Income Statement For the Year Ended December 31, 2020 Sales (270,000 units) $1,350,000 Cost of goods sold 900,000 Gross profit 450,000 Operating expenses Selling $270,000 Administrative 189,000 459,000 Net loss $19,000) A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable
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