Due to the sluggish economy, the Bi-Wheels Company has experienced some difficulty in selling its bicycles. The following data relate to the current year:

Sales (9,000 units @ $100/unit)	$900,000
Less variable costs (9,000 @ $60/unit)	540,000
Contribution margin	$360,000
Less fixed costs	400,000
Net operating loss	($40,000)

Question 2 (10 points total):

(a) Compute Bi-Wheels' annual breakeven point, in both units and dollars. Also, compute the contribution margin ratio.

(b) The vice-president in charge of sales is certain that a 10% reduction in selling price in combination with a $30,000 increase in advertising will cause sales volume to increase by 50%. What effect would this strategy have on operating income (_B) of the company?