Cullumber Orthotics Company distributes a specialized ankle support that sells for $40. The company's variable costs are $30per unit; fixed costs total $370,000each year.

(a1)

Calculate contribution margin ratio. (Round ratio to 2 percentage places, e.g. 0.38 = 38%.)

Contribution margin ratio

enter contribution margin ratio in percentages rounded to 0 decimal places %

(a2)

If sales increase by $40,000per year, by how much should operating income increase?(Use the rounded contribution margin ratio calculated in the previous part.)

Change in operating income

$enter change in operating income amount in dollars

(b)

Last year, Cullumber sold40,000ankle supports. The company's marketing manager is convinced that a5% reduction in the sales price, combined with a $85,000increase in advertising, will result in a36% increase in sales volume over last year. Compute the projected income. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Projected income

$enter projected income amount in dollars

Should Cullumber implement the price reduction?

Cullumberselect an option shouldshould not implement the price reduction because the estimated operating income isselect an option moreless than the current operating income.