Cvp analysis :profit planning; Horton Manufacturing Inc. (HMI) is suffering from the effects of increased local and global competition for its main product, a lawn mower that is sold in discount stores throughout the Unitedstates. The following table shows the results of HMI's operations for 2016.

sales (12,500 units @84) 1,050,000

less variable costs(12,500@$63) 787,500

contribution margin 262,500

less:fixed costs 296,000

operating profit (loss) ($33,500)

Required:

1. Compute HMI's breakeven point in both units and dollars. Also , compute the contrubution margin ration. (note round the number of break even units to a whole number)

2.) What would be the required sales in units and in dollars, to generate a pretax profit of 30,000

3.) Assume a combined income tax rate of 40%. What would be the required sales volume, in both units and in dollars, to generate an after tax profit of 30,000( round number of units up to a whole number )

4.) Prepare a contribution income as a check for your calculations in requirement 3 above.

5.) The manager belives that a 60,000 increase in advertising would result inn a 200,000 increase in annual sales. If the manager is right , what will be the effect on the company's operating profits or loss?

6.) Refer to the original data . The vice president in charge of sales feels that a 10% reduction in price in combination with a 40,000 increase in advertising will cause unit sales to increase by 25%. What effect would this strategy have on operating profit (loss)?

7.) Refer to the original data. During 2016, HMI saved $5 of unit varible costs per lawn mower by buying from a different manufacturer. However the cost of the changing the plant machinery to accomodate the new part cost an aditional 50,000 in fixed cost per year. Was this a wise change? Why or why not?