GarageDoors.com is a family owned business that produces a premium garage door for residential customers. The company recently opened a new production facility in Oak Ridge, Tennessee in 2019. This facility produces the companys premium garage door, Classical Carriage House, for residential customers. GarageDoors.com is exploring ways to improve the efficiency of its production process and increase profitability. They produced 400 garage doors in 2019. GarageDoors.com contribution margin income statement for the year ended December 31, 2019 is given below:

Total Per Unit

Sales $960,000 $2,400.00

Variable expenses 440,000

Contribution margin 520,000

Fixed expenses 240,000

Net operating income $280,000

What If #2:

2. Refer to the original data. The companys sales manager believes that a reduction of 5% in the sales price ($120) combined with a $30,000 increase in advertising would increase annual sales by 100 units (garage doors). Recalculate the companys new break-even point in sales dollars and units; contribution margin ratio, margin of safety, operating leverage, and net income.

Explanation (2 pts.)

On your data block page: Would you recommend that the company do as the sales manager suggests? Why or why not? Explain.