ERS Company manufacture and sells camping equipments in the Middle East. The company is based in the Sultanate of Oman. One of the companys products, a camp lamp, is currently sold for $90 per unit. Information about the costs incurred in the production shows that the variable expenses for producing a camp lamp is $65 per unit, and the fixed expenses are $140,000 per month.

1. Calculate ERS Companys breakeven point in number of lamps and in total sales dollars.
2. If the variable expenses per lamp increase as a percentage of the selling price, will it result in a higher or a lower break-even point? Why? (Assume that the fixed expenses remain unchanged.)
3. At present, the company is selling 9,000 lamps per month. The sales manager is convinced that a 10% reduction in the selling price will result in a 25% increase in the number of lamps sold each month.

Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. Show both total and per unit data on your statements.

4. Refer to the data in (3) above. How many lamps would have to be sold at the new selling price to yield a minimum net operating income of $72,000 per month?