JJPluxem manufactures and sells one product, Sefram 7 a digital security system for commercial properties. Each system sells for $2,000 and the variables costs are $800 per unit. Fixed costs consist of manufacturing costs of $4,400,000 and marketing costs of $600,000. Managements profit goal for the coming year is operating income of $2,000,000.

1. What is the breakeven in dollars?
2. Budgeted sales for the coming year are $14.4 million. What is the margin of safety in units?
3. The company is considering a new marketing strategy where the selling price is decreased by 20%. Management believes the company will realize a 25% increase in the number of units sold over budgeted sales as a result. An advertising campaign will accompany the new marketing strategy that will cost an additional $250,000. What is the impact of the new strategy on operating income? Should the company adopt the new strategy? Why or why not?

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