Loren Company's single product has a selling price of $15 per unit. Last year the company reported variable expenses per unit of $9, fixed expenses of $90,000, and a net operating income of $30,000.

Required:

1- Compute the number of unit sales to achieve the mentioned net operating income ($30,000). (3 MARKS)

2- A study by the sales manager discloses that a 10,000 increase in the advertising costs (fixed costs) would increase unit sales by 10%. If her proposal is adopted, what is the new net operating income? (3 MARKS)

3- If you are the financial manager on the same company, which scenario (1 or 2) you prefer to adopt and why? (2 MARKS)