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 operating results for last year were as follows

Sales	$	1,000,000
Variable expenses		500,000
Contribution margin		500,000
Fixed expenses		160,000
Net operating income	$	340,000

Required:

Answer each question independently based on the original data:

5. The sales manager is convinced that a 10% reduction in the selling price, combined with a $69,000 increase in advertising, would increase this year's unit sales by 25%.

a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented?

b. Do you recommend implementing the sales manager's suggestions?

6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.70 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 $340,000 net operating income as last year? Do not prepare an income statement; use the incremental analysis approach.