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1. Shawn Penn \& Pencil Set, Inc. has fixed costs of $80,000. Its products sell for $5 per unit and have variable costs of $2.50 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $400,000 and drive up the fixed costs to $120,000. Although the price will remain at $5.00 per unit, the increase in automation will reduce variable costs per unit by 15%. As a result of Bic's suggestion, will the breakeven point go up or down? Compute the necessary numbers to justify your answers. 2. Firms in Oduduwa company often employ both high operating and financial leverage because of the use of modern technology and close borrower-lender relationships. Assume Oduduwa, has sales volume of 100,000 units at a price of $25.00 per unit; variable cost of $5.00 per unit and a fixed costs of $1,500,000. What is the degree of combined leverage for this Oduduwa firm? 3.Hazardous Toys Company produces boomeranigs that sales that sales for $8.00 each and has variable costs of $7.50. Fixed costs of $15,000. A Calculate the breakeven points in unit, B. Compute sales in units needed to earn a profit of $25,000 4. Enesco Lighting Company has fixed costs of $100,000, and sells its unit for $28, and has variable costs of $15.5 per unit. Compute the breakeven points in units and in sales. 5. refer to question 4 above. Ms. Watts comes up with a new plan to cut fixed costs to $75,000. However, more labor will now be required, which will increase variable costs per unit to $17. The sales price will remain at $28. What is the new breakeven points in sales and units? 5 B. Under the new plan, what is likely to happen to profitability at a very high-volume level compared to the old plan. 6. Define financial leverage and operating leverage. 7. Define, Variable costs, unit variable costs, fixed costs and unit fixed costs