Eaton Tool Company has fixed costs of $200,000, sells its units for $56, and has variable costs of $31 per unit.

a. Compute the break-even point.

b. Ms. Eaton comes up with a new plan to cut fixed costs to $150,000. However, more labor will now be required, which will increase variable costs per unit to $34. The sales price will remain at $56. What is the new break-even point?

c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?

d. Calculate the DOL at 12,000 units sold at the conservative structure (FC $150,000) and estimate by how much the operating profit will change (in $) if the units sold fall from 12,000 to 10,000?