Feather Friends, Incorporated, distributes a high$-$quality wooden birdhouse that sells for $$40$ per unit. Variable expenses are $$20\mathrm{.}00$ per unit, and fixed expenses total $$200,000$ 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 $200,000$

Net operating income $ $340,000$

Required:

Answer each question independently based on the original data:

$1.$ What is the product's CM ratio?

$2.$ Use the CM ratio to determine the break$-$even point in dollar sales.

$3.$ Assume this year$$s unit sales and total sales increase by $44,000$ units and $$1,760,000,$ respectively. If the fixed expenses do not change, how much will net operating income increase?

$4-$a$.$ What is the degree of operating leverage based on last year's sales?

$4-$b$.$ Assume the president expects this year's unit sales to increase by $10\%.$ 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 $15\%$ reduction in the selling price, combined with a $$76,000$ 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$.$ If the sales manager's 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 $$1\mathrm{.}60$ per unit. He thinks that this move, combined with some increase in advertising, would increase this year's unit sales by $25\%.$ How much could the president increase this year's advertising expense and still earn the same $$340,000$ net operating income as last year?