Feather 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 aperating results for last year were as follows:

Sales	$	1,120,000
Variable expenses		560,000
Contribution margin		560,000
Fixed expenses		160,000
Net operating income	$	400,000

Required:

Answer each question independently based on the original data:

The sales manager is convinced that a 14% reduction in the selling price, combined with a $70,000 increase in advertising, would increase this year's unit sales by 25%.

- If the sales manager is right, what would be this year's net operating income if his ideas are implemented? Do you recommend implementing the sales manager's suggestions?

- The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.80 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $400,000 net operating income as last year?