Problem 3: The following monthly data are available for the Rod's Reels Company and its only product, the RR high-capacity salmon reel: Total Per Unit Sales (400 units) $110,000 $275 Variable expenses 44.000 110 Contribution margin $66,000 $165 Fixed expenses Net income 52.800 $13,200 Required: a) Without resorting to calculations, what is the total contribution margin at the break-even point? b) Management is contemplating the use of plastic gearing rather than metal gearing in the RR high- capacity salmon reel. This change would reduce variable costs by $15. The company's marketing manager predicts that this would reduce the overall quality of the product and thus would result in a decline in sales to a level of 350 units per month. Should this change be made? c) Assume that Rod's Reels Company is currently selling 400 units of the RR high-capacity salmon reel per month. Management wants to increase sales and feels that this can be done by cutting the selling price by $25 per unit and increasing the advertising budget by $20,000 per month. Management believes that these actions will increase unit sales by 50%. Should these changes be made? d) Assume that Rod's Reels Company is currently selling 400 units of the RR high-capacity salmon reel. Management wants to automate a portion of the production process for the RR high-capacity salmon reel. The new equipment would reduce direct labour costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of $10,000. Management believes that the new equipment will increase the reliability of the RR high-capacity salmon reel, thus resulting in an increase in monthly sales of 12%. Should these changes be made?