Please provide all calculations in order to earn maximum marks.

Q.1 MochaInternational Company [MIC], makes and sells specialized software for various

computer applications. Sales have been somewhat erratic over the most recent period.

Product TW is being reviewed :

Sales - 12,500 units : $300,000

Variable expenses 180,000

Contribution Margin 120,000

Fixed Costs 130,000

Net Operating Loss $(10,000)

You are the Managerial Accountant for Mocha, and have been asked to review the following options available to Mocha Int'l:

Part A

Before proceeding you must determine the following, and also explain why this information is useful:

a) The break-even point in sales units and dollars

b) The margin of safety and the degree of operating leverage

Part B

Following are suggestions made by various members of the Sales & Management committee:

Sales and Marketing has suggested as follows:

1. An increase of $8,000 in advertising that can increase monthly sales by $70,000
2. Current Sales can be doubled by reducing selling price by 10%, and increasing monthly advertising by $35,000
3. An ad agency has suggested new enhanced packaging, costing $0.60 per unit, would increase sales units by 2,445

As Managerial Accountant, you are asked to calculate the effect of each of the above suggestions and provide a brief explanation of the value of each one. [You must be objective in presenting the three options]