Corex Company produced and sold 80,000 bags during the year 2018 at $65 per unit. Total fixed cost was $1,080,000 while variable production cost was $25 per unit and variable selling cost was $5 per unit.

(a) Use cost-volume profit analysis to prepare a contribution margin income statement for the year 2018.

(b) After preparing the contribution margin income statement, management determined the variable production costs would increase by 20% and the variable selling costs would increase by $1 per unit. However, to keep the products competitively priced, management decided not to change the selling price of the bags. Use cost-volume-profit analysis to determine how many bags the company must sell to breakeven.