Father Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales 1,080,000 Variable expenses 540,000 Contribution margin 540,000 Fixed expenses 160,000 Net operating income 380,000 1. What is the products CM ratio? 2. Use the CM ratio to determine the break-even point in dollars sales. 3. If this years sales increase by $53,000 and fixed expenses do not change, how much will net operating income increase? 4. a. What is the degree of operating leverage based on last years sales? b. Assume the president expects this years sales increase by 15%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 14% reduction in the selling price, combined with a $63,000 increase in advertising, would increase this years unit sales by 25%. a. If the sales manager is right, what would be this years net operating income if his ideas are implemented? b. If the sales managers ideas are implemented, how much will net operating income increase or decrease over last year? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.10 per unit. He thinks that this move, combined with some increase in advertising expense and still earn the same $380,000 net operating income as last year?