Cosmo, Inc. produces memory enhancement kits for DVR machines.Sales have been very erratic, with some months showing a loss.The company's contribution format income statement for the most recent month is given below:

Sales (13,500 units at $20 per unit)$270,000

Variable expenses189,000

Contribution margin (CM)81,000

Fixed expenses90,000

Net operating loss$ (9,000)

Required:

a)Compute the company's break-even point in both units and dollars.

b)The sales manager feels that an $8,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $70,000 increase in monthly sales.If the sales manager is right, what will be the effect on the company's monthly net operating income or loss?

c)Refer to the original data.The president is convinced that a 10% reduction in the selling price, combined with an increase of $35,000 in the monthly advertising budget, will cause unit sales to double.What will the newcontribution format income statementlook like if these changes are adopted?

d)Refer to the original data.The company's advertising agency thinks that a new package would help sales.The new packagebeing proposedwould increase packaging costs by $0.60 per unit.Assuming no other changes, how many units would have to be sold each month to earn a pretax profit of $4,500?