Carmen, Inc. produces Electronic Games for personal uses. The companys contribution format income statement is given below:

Sales (20,000 units)	360,000
Variable expenses	280,000
Contribution margin	80,000
Fixed expenses	92,000
Net Loss	(8,000)

Required:

1. Compute the companys CM ratio and its break-even point in both units and dollars
2. The production manager proposed to include a new component in the product that would increase direct material cost by $1.5 per unit. But this requires a promotional campaign which costs $22,000 to maintain same number of unit sales. Do you accept the proposal? Explain Why?