CVP Case: Cardinal Eye Care Cardinal Eye Care has been in operation for several years. Analysis of the business's financial information shows the following: $150 Average selling price per pair of glasses Variable expenses per pair: Lenses and frames Sales commission Variable overhead Annual fixed expenses: Selling Administrative $48 $20 $13 $29,000 $61,300 Cardinal Coop, owner, would like some information, below. I recommend preparing contribution format income statements to analyze the "what if" analyses below. A. What is the break-even point in pairs of glasses? Perform the computation, and also prepare a contribution format income statement at the break-even point. B. How much sales revenue must be generated to produce $105,000 income? Also how many pair of glasses must be sold to attain this net income? I recommend preparing a contribution format income statement to arrive at this. C. New, highly durable, lenses are available. These lenses will increase variable expenses per pair of lenses and frames by $3. With these lenses, Cardinal expects annual fixed administrative expenses also to increase by $5,000. Cardinal will increase the selling price of glasses to $154 with the new lenses. What will be the break even point in sales dollars and units if these changes are adopted? Again a contirbution format income statement would be a nice way to analyze this. D. Refer to the original information. How much sales revenue must be generated to arrive at a net income equal to 20% of sales revenue? E. Cardinal is considering adding a high-tech lens-grinding lab, which will save $9 per pair of glasses in lens cost. However this will increase annual administrative fixed costs by $18,000. She would also like to increase sales commissions to $22 per pair of lenses. She expects these changes to result in 600 additional pair of glasses being sold. Should these changes be made? F. Cardinal has been advised that the number of glasses sold would increase by 30% if the selling price was lowered by 10% and an additional $30,000 was spent on advertising. Assume Cardinal currently sells 3,600 pair of glasses, would you recommend making these changes? Contribution Format Income Statement Bottles Sold 5,000 Per Unit Total Sales $35.00 $ 175,000 Variable costs: Cost 1 $3.00 15,000 Cost 2 $11.00 55,000 Cost 3 $1.00 5,000 Cost 4 $9.00 45,000 Total variable $24.00 55,000 Contribution margin $11.00 Fixed costs: Cost 1 $12,000.00 Cost 2 $21,000.00 Total fixed 33,000 Profit $ $ 22,000