Falkirk Ltd. produces a single product, the Thingme. Last year it sold 100,000 units with the following results: Sales $2,500,000 Variable Costs $1,000,000 Fixed costs $ 400,000 Operating income before taxes. $ 1,100,000 In an effort to improve the quality of its product, Falkirk is considering replacing one of its component parts, which costs $2 per unit, with an improved component which will cost $3 per unit. It will also have to purchase a new piece of equipment in order to change their production process. It will cost $120,000 and will have an expected useful life of 5 years. At the end of the 5 years, it will be obsolete and will be sold for $20,000. The company depreciates all of its assets using the straight-line method. The corporate tax rate is 30%. REQUIRED: SHOW ALL CALCULATIONS. ALL PARTS ARE INDEPENDENT. 1. Senior management expects that the new component will improve the Thingmes quality. Would a 10% increase in number of units sold increase the overall profitability of Fakirk? 2. How many units would Falkirk have to sell, after it makes the changes noted above, to earn an after tax income of $575,000? 3. Calculate the margin of safety, in units, if the changes are made but there is no increase in number of units sold. Has the margin of safety improved or deteriorated from last years actual results? What does the margin of safety tell us? 4. If Falkirk does not change the selling price but makes the changes noted above, how many units would Falkirk have to sell to earn the same income after tax as last year?