PLEASE HELP

Rayburn Co. manufactures and sells glow in the dark phone cases. Terry Andreikowski, the president of the Rayburn Co., has a hard time understanding the accounting in his firm. Yesterday morning, he was very confused when he received mail from his accountant, Julia Omberg. She sent him the following income statements: Terry was somewhat frustrated and said "Last month, we sold 1,000 glow in the dark phone cases and earned $6,850 in operating income. This manth, when we sold 1,500 cases, I thought we'd make $10,275. This income statement shows an operating income of $12,100 ! How can I ever make any plans when I can't even predict my income? This accounting non-sense is too confusing! I will give Julia one last chance to explain to me what's going on." "Can you please try to explain this operating income non-sense to me once more?" Terry asked Julia on the phone. Terry said: "After I saw last month's income statement, I thought each glow in the dark case generated $6.85 in net income; now this month each one generates $8.071 No changes took place in the cost of each case, so why does this change in operating income happen? If I had known I was going to have a higher operating income, I would ve looked more seriously at adding to our product line!" After patiently listening to Terry's rant, and taking a deep breath, Julia answers: "Of course, Terry. Let me explain to you again how you made so much more operating income than what you were expecting." Required: HINT: Consider whether each expense if fixed or variable. You can assume $500 of wages is a fixed expense, utilities are fixed (on a monthly payment plan where they pay the same amount each month), and that $500 of the advertising is fixed. a) Assume Julia's role. Explain to Terry why his use of operating income per phone case was in error. b) Terry plans to sell 500 glow in the dark phone cases next month. How much operating income can Terry expect to earn next month if he realizes his planned sales? c) Terry was not at all happy with the projected income statement you showed him for a sales level of 500 cases. Now he wants to know how many glow in the dark cases he needs to sell to earn $3,700 in operating income. As a safety net, he would like to know how many phone cases he will need to sell to break even. d) Terry was evaluating 2 additional options to increase the number of cases sold next month. The options are as follows: Which plan should Terry implement? At what level of sales would he be indifferent between the two plans? e) Right after Terry completed an income projection for 1,200 glow in the dark phone cases, his supplier informed him of a 20% increase in cost of goods sold, effective immediately. Terry knows that he cannot pass the entire increase on to his customers, but he thinks he can pass on half of the 20% increase while suffering only a 5% decrease in units sold. Should Terry respond to the increase in cost of goods sold with an increase in price? f) Please refer back to the original information. Terry has decided to add sparkly laptop cases to his product line. He has found a supplier who will provide the sparkly laptop cases for $32, and he plans to sell them for $55. They are premium quality cases. All other variable costs currently incurred for selling glow in the dark phone cases will be incurred for selling sparkly laptop cases at the same rate. Additional fixed costs of $350 per month will be incurred. He believed he can sell one laptop case for every 3 phone cases. How many sparkly laptop cases and glow in the dark phone cases will Terry need to sell each month in order to break even