Cost-Volume-Profit Relationships 383 Problems connect PROBLEM 8-1 Performing Basic CVP Analysis [LO1 - CC4; LO2- CC6, 7, 10] excel Stratford Company distributes a lightweight lawn chair that sells for $15 per unit. Variable expenses are 40% of sales, and fixed expenses total $198.000 annually. Required: Answer the following independent questions: CHECK FIGURE (2) Break-even: 22,000 units 5. Refer to the original data. Assume that the company sold 28,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $60,000 increase in advertising expenditures, would increase annual unit sales by 50%. Prepare two contribution format income statements: one showing the results of last year's operations, and one showing what the results of operations would be if these changes were made. Would you recommend that the company do as the sales manager suggests? 6. Refer to the original data. Assume again that the company sold 28,000 units last year. The president feels that it would be unwise to change the selling price. Instead, she wants to increase the sales com- mission by $2 per unit. She thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach