Perez Corporation sells hammocks; variable costs are $71 each, and the hammocks are sold for $140 each. Perez incurs $394,200 of fixed operating expenses annually.

1.) a.) Determine the sales volume in units and dollars required to attain a $75,000 profit. b.) Prepare an income statement using the contribution margin format.

2.) Perez is considering implementing a quality improvement program. The program will require a $9 increase in the variable cost per unit. To inform its customers of the quality improvements, the company plans to spend an additional $34,800 for advertising. Assuming that the improvement program will increase sales to a level that is 4,600 units above the amount computed in Requirement a, prepare a budgeted income statement using the contribution margin format.

3.) Determine the new break-even point in units and sales dollars as well as the margin of safety percentage, assuming that the quality improvement program is implemented.