Problem 3: The following monthly data are available for the Rod's Reels Company and its only...

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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 seling 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 be leves that the new equipment will increase the reliability of the RR recaplacy salmco reel, thus resulting in an increase in monthly sales of 12 Should these changes be made 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 seling 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 be leves that the new equipment will increase the reliability of the RR recaplacy salmco reel, thus resulting in an increase in monthly sales of 12 Should these changes be made