CompuSale LTD. produces and sells printing products across Canada. Last year, sales volume totaled $850,000. Volume for the first five months of the current year totaled $600,000, and sales were expected to be $1.6 million for the entire year. Unfortunately, the printing business in the region where CompuSale is located is extremely competitive. More than 100 printing shops are all competing for the same business. The company currently manufactures one type of high-quality printer with the average unit selling prices, unit variable costs, and direct fixed costs are as follows:

1) Calculate the following:

a. Number of printers that are expected to be sold during the current year

b. number of printers that must be sold for CompuSale to break even

c. sales dollars in order to break even

d. generate a graph which plots the break even analysis

2) CompuSale can buy machines that will make the majority of the printer parts. If the company chooses to purchase the machines, the variable costs will decrease by 8% but the fixed costs will increase by $76,000. The plan would be to purchase the machine at the beginning of July. Fixed costs for the company are incurred equally throughout the year. Calculate the following:

a. impact on operating income

b. new number of printers to break even

c. sales dollars to break even

3. CompuSale is considering the option of opening a new retail outlet which will increase salaries by $40,000; insurance by $10,000 and rent expense by $30,000 per year. This is expected to increase sales by 23 percent and the plan would be to open this up at the beginning of July (half way through the upcoming year). Calculate the following:

a. Impact on CompuSales expected profits for the year

b. new break even point in quantity of printers

c. new break even point in sales dollars

4. Write a memo to the CFO of CompuSale discussing your recommendations from both question 2 & 3 above. Discuss both quantitative and qualitative factors in your recommendation.

Budgeted Costs Unit Sales Price Direct Labour / Unit Direct Materials / Unit Variable Mfg. OH/Unit Depreciation Insurance Expense Salaries Expense Rent Expense $ 5,000 1,386 1,433 1,195 150,000 50,000 10,000 15,000