Interchange Inc. had sales of $400,000, based on a unit selling price of $200. The variable cost per unit was $175, and fixed costs were $75,000. The maximum sales within Interchange Inc.s relevant range are 2,750 units. Interchange Inc. is considering a proposal to spend an additional $32,750 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity.

a. Construct a cost-volume-profit chart indicating the break-even sales for last year. Verify your answer, using the break-even equation.

Break-even sales (dollars) = 600,000 and Break-even sales (units) = 3,000

b. Using the cost-volume-profit chart prepared in part (1), determine (A) the income from operations for last year and (B) the maximum income from operations that could have been realized during the year. Verify your answers using the mathematical approach to cost-volume-profit analysis. Income from operations for last year Per unit # of units Total Sales 200 2000 400,000 Variable Costs 175 2000 350,000 Contribution margin 25 2000 50,000 Fixed Costs 75,000 Operating Income 25,000

Income from operations for last year

Per unit # of units Total

Sales 200 2000 400,000

Variable Costs 175 2000 350,000

Contribution margin 25 2000 50,000

Fixed Costs 75,000

Operating Income 25,000

(B)

Sales 200 2,750 550,000

Variable Costs 175 2,750 481,250

Contribution Margin 25 2,750 68,750

Fixed Costs 75,000

Operating Income 62,500

c. Construct a cost-volume-profit chart indicating the break-even sales for the current year, assuming that a noncancellable contract is signed for the additional billboard advertising. No changes are expected in the unit selling price or other costs. Verify your answer, using the break-even equation.

d. Using the cost-volume-profit chart prepared in part (3), determine i. the income from operations if sales total 2,200 units and ii. the maximum income from operations that could be realized during the year. Verify your answers using the mathematical approach to cost-volume-profit analysis.

(I need help with questions C & D)