Problem 4-18 Basic Cost-Volume-Profit Analysis (LO1, LO3, LO4, LOS, LOS] Klein Company distributes a high-quality bird feeder that sells for $20 per unit. Variable costs are $6 per unit, and fixed costs total $196,000 annually. points Required: Answer the following independent questions: Skipped 1. What is the product's CM ratio? CM ratio eBook Ask 2. Use the CM ratio to determine the break-even point in sales dollars. Print Break-even point in sales dollars CS 3. The company estimates that sales will increase by $66,000 during the coming year due to increased demand. By how much should Scar operating income ncrease? Cam CST LA... Sc.eases by 4. Assume that the operating results for last year were as follows: Sales Variable expenses $400,000 106,000 points Contribution margin Fixed expenses 294,000 196,000 Skipped Operating income $ 98,000 eBook a. Compute the degree of operating leverage at the current level of sales. Degree of operating leverage Print How much should operating income increase to? CS b. The president expects sales to increase by 15% next yea Scanned with Cam Orerating income increases by 5-a. Refer to the original data. Assume that the company sold 23,000 units last year. The sales manager is convinced that a 15% reduction in the selling price, combined with a $40,000 increase in advertising expenditures, would cause annual sales in units to increase by 20%. Prepare two contribution format income statements, one showing the results of last year's operations and one showing what the results of operations would be if these changes were made. (Round "Per Unit" answers to 2 decimal places.) oints Skipped KLEIN COMPANY Contribution Margin Income Statement Last Year 23,000 units Total Unit Proposed units Total Per Unit eBook 0.00 1 0 .00 Ask $ 0 1111 $ 5-b. Would you recommend that the company do as the sales manager suggests? Scanned with Yes CamScan Book 6. Refer to the original data. Assume again that the company sold 23,000 units last year. The president feels that it would be unwise change the selling price. Instead, he wants to increase the sales commission by $3 per unit. He thinks that this move, combined with some increase in advertising, would increase annual unit sales by 50%. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach. Ask The amount by which advertising can be increased is Print Scanned with CamScanner