Phan has proposed a plan to get the partnership "out of the red" and improve its profitability. she feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. the selling price per unit could be increased to only $5.25 because of competitive pressures. Phan estimates that sales volume will increase by 25%. What effect would phans plan have on the partnerships profits and its break-even point in dollars?

PHAN AND NGUYEN LLP Income Statement Year Ending December 31, 2020 Sales (240,000 units) Cost of goods sold Gross profit Operating expenses Selling $280,000 Administrative 150,000 Net loss $1,200,000 800,000 400,000 430,000 $ (30,000) A cost behaviour analysis indicates that 75% of the cost of goods sold is variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable