Eastern Broom Company manufactures, amongst other broom products, corn brooms. To make a corn broom, a worker begins the manufacturing process by selecting a bundle of straw, which is prepackaged by the supplier, and a broom handle. The worker puts both items into a machine and presses a button. The machine then binds the bundle of straw and the broom handle to complete production. A production worker, who is paid $40 per hour, can make 20 corn brooms each hour. Total production is limited by the number of labour hours available, which is 1,500. Eastern Broom Company sells its corn brooms for $28 each and is currently operating at capacity? Annual fixed costs assigned to the corn broom operation is $540,000. The production supervisor has provided data, which appears in Appendix A, summarizing production volume, materials cost, and labour costs for the most recent 30 weeks of operations. Appendix A Week Units Produced Direct Labour Direct Materials Week Units Produced Direct Direct Labour Materials 1 23,800 $46,400 $135,100 16 25,800 $51,600 $186,100 2 25,400 $54,700 $146,400 17 25,400 $52,300 $139,900 3 27,600 $48,400 $160,200 18 28,500 $53,400 $164,300 4 26,600 $46,200 $152,000 19 23,600 $50,200 $152,100 5 21,600 $36,600 $143,600 20 27,000 $47,600 $147,700 6 26,300 $55,600 $160,300 21 25,900 $50,400 $145,700 7 22,200 $38,500 $140,500 22 25,100 $52,800 $146,700 8 25,000 $55,200 $169,300 23 29,700 $53,400 $170,300 9 29,600 $55,700 $151,200 24 27,400 $54,700 $183,400 10 21,100 $39,000 $132,200 25 21,400 $43,000 $118,400 11 24,800 $50,400 $155,200 26 21,400 $44,000 $140,400 12 25,800 $61,900 $151,900 27 23,200 $50,300 $152,400 13 28,700 $59,800 $158,100 28 23,700 $46,400 $135,500 14 24,600 $54,900 15 27,100 $53,400 $157,600 29 $175,700 30 23,800 $51,700 $145,700 23,700 $47,400 $132,900 A group of students from a local university has undertaken a statistical cost study for Eastern Broom Company. The students believe that a reasonable estimate of the labour cost per unit of production is $2.00 and the cost of materials per unit of production is $6.00. The product manager has advised you to use these cost estimates for materials and labor when answering the questions that follow? 5. How many corn brooms must Eastern Broom Company sell this coming year to break even? 6. Management believes that if it increases advertising (a fixed cost) by $80,000 it will be able to increase the price for each corn broom to $30 and continue to operate at capacity. What is the effect on income of making this change?