LABEL EACH STEP:

The Westover Company manufactures and sells pens. Currently, 5,500,000 units are sold per year at $0.50 per unit. Fixed costs are $1,140,000 per year. Variable costs are $0.20 per unit. Read the requirements. Requirement 1. What is the current annual operating income? (a) Start by determining the formula to calculate operating income. Requirements Consider each case separately: 1. a. What is the current annual operating income? b. What is the current breakeven point in revenues? Compute the new operating income for each of the following changes: 2. A $0.10 per unit increase in variable costs 3. A 20% increase in fixed costs and a 20% increase in units sold 4. A 30% decrease in fixed costs, a 30% decrease in selling price, a 10% decrease in variable cost per unit, and a 45% increase in units sold Compute the new breakeven point in units for each of the following changes: 5. A 20% increase in fixed costs 6. A 20% increase in selling price and a $10,000 increase in fixed costs