KLM Company sells a high-quality blender that sells for $50 per unit. Variable costs are $32 per unit, and fixed costs total $360,000 annually.

Required:

Answer the following independent questions:

What is the product's Contribution Margin ratio? (1 mark)

Calculate the break-even point inbothsales dollars and units. (2 marks)

Calculate how many units the company must sell to earna $72,000 before tax profit. (2 marks)

The company estimates that sales will increase by $120,000 during the coming year due to increased demand. By how much should operating income increase? (2 marks)

Assume that the company sold 40,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $30,000 increase in advertising expenditures, would cause annual sales in units to increase by 20%. Would you recommend that the company do as the sales manager suggests? Show calculations to support your answer. (4 marks)