Networks Company manufactures wireless routers. The company's contribution format income statement for the most recent year is given below: Total Per Unit Percentage of Sales Total Per Unit Percentage of Sales Sales (25,000 units)............ Less variable expenses $2,500,000 1,500,000 $100 60 100% 7% BRE 1,000,000 $40 $ 40 7% Contribution margin....... Less fixed expenses Operating income.... 800,000 $ 200,000 Management believes operating income can be further improved and would like you to prepare the following analysis. 5. Assume that sales increase by $600,000 next year. If cost behaviour patterns remain unchanged, by how much will the company's operating income increase? Use the CM ratio to determine your answer. [3 marks) Refer to the original data to answer Question 6. 6. Assume that next year, management wants the company to earn minimum profit of $500,000. How many units will have to be sold to meet this target profit figure? (3 marks) Refer to the original data to answer Questions 7 and 8. 7. Compute the company's margin of safety in dollars. (3 marks) 8. Compute the company's margin of safety in percentage form. [3 marks) Refer to the original data to answer Questions 9 to 11. 9. Compute the company's degree of operating leverage at the current level of sales. (3 marks) 10. Assume that through a more intense effort by the sales staff, the company's sales will increase by 12% next year. By what percentage would you expect operating Income to increase? Use the operating leverage concept to obtain your answer. 3 marks) 11. Compute the company's new sales in units. 3 marks) Use the information below to answer Questions 12 through 14. In an effort to increase sales and profits, management is considering using a higher-quality microprocessor in the router. The higher-quality microprocessor would increase variable costs by $8 per unit, but management could eliminate one quality inspector, who is paid a salary of $40,000 per year. The sales manager estimates that the higher-quality microprocessor would increase annual sales by at least 10% 12. Compute the company's new break-even point in units of sales. 3 martes) 13. Compute the company's new break-even point in dollars of sales. 3 marks) 14. Would you recommend that the changes be made? Why or why not? (4 maris