Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Required: Answer the following independent questions: 1. What is the product's CM ratio? Answer is complete and correct. CM ratio 50 % 2. Use the CM ratio to determine the break-even point in dollar sales. Answer is complete and correct. Break-even point in sales $ 360,000 dollars 4. Assume that the operating results for last year were: Sales $3,000,000 1,500,000 Variable expenses 1,500,000 Contribution margin Fixed expenses 180,000 1,320,000 Net operating income $ a. Compute the degree of operating leverage at the current level of sales. (Round your answer to 2 decimal places.) Answer is complete and correct. Degree of operating 1.14 leverage 5. Refer to the original data. Assume that the company sold 28,500 units last year. The sales manager is convinced that a 12% reduction in the selling price, combined with a $75,000 increase in advertising, would increase annual unit sales by 50%. a. Prepare two contribution format income statements, one showing the results of last year's operations and one showing the results of operations if these changes are made. (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.) Answer is complete but not entirely correct. Feather Friends, Inc., Contribution Income Statement Last Year Proposed 28,500 units 49,500 units Total Per Unit Total Per Unit $ 3,960,000 $ 120.00 $ 5,049,000 $ 102.00 1,980,000 60.00 2,970,000 60.00 1,980,000 60.00 2,079,000 42.00 180,000 256,000 $ 1,800,000 $ 1,823,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income b. Would you recommend that the company do as the sales manager suggests? No Yes 6. Refer to the original data. Assume again that the company sold 28,500 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.50 per unit. He thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach. Answer is complete but not entirely correct. The amount by which advertising can be increased is $ 25,937