Frieden Company's contribution format income statement for the most recent month is given below:

Sales (49,000 units) $ 1,323,000 Variable expenses 926,100 Contribution margin 396,900 Fixed expenses 317,520 Net operating income $ 79,380

The industry in which Frieden Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

Required:

1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $8.10 per unit. However, fixed expenses would increase to