Practical Case no. 14 (Break-even-point analysis) CHS Company developed the following income statement using a contribution margin approach: CHS COMPANY PROJECTED INCOME STATEMENT FOR THE CURRENT YEAR ENDING DECEMBER 31 Sales 240,000 Less variable costs: Variable manufacturing costs Variable selling costs Total variable costs Contribution margin 60,000 36,000 96,000 144,000 Less fixed costs: Fixed manufacturing costs Fixed selling and administrative costs Total fixed costs Operating income 85,000 35,000 |_ 120,000 24,000 The projected income statement was based on sales of 12,000 units. CHS has the capacity to produce 15,000 units during the year. Required: a) Determine the break-even point in units. b) The sales manager believes the company could increase sales by 1,000 units if advertising expenditures were increased by 15,000. Determine the effect on income if the company increases advertising expenditures. c) What is the maximum amount the company could pay for advertising if the advertising would increase sales by 1,000 units