Problem: Stratford Company distributes a lightweight lawn chair that sells for $15 per unit. Variable expenses are $6 per unit, and fixed expenses total $180,000 annually. Answer the following independent questions. 1. What is the product's contribution margin (CM) ratio? (15 points) 2. Use the CM ratio to determine the break-even dpoint in sales dollars. (15 points) 3. The company estimates that sales will increase by $45,000 during the coming year due to increased demand. By how much should net operating income increase? (15 points) 4. Assume that the operating results for last year were as follows: Sales Variable expenses $360,000 144,000 Contribution margin 216,000 Fixed expenses 180,000 Net operating income $ 36,000 a. Compute the degree of operating leverage at the current level of sales. (15 points) b. The president expects sales to increase by 15% next year. By how much should net operating income increase? (20 points) 5. Refer to the original data and ignore Question 4. Assume that the company sold 28,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $70,000 increase in advertising expenditures, would increase annual unit sales by 50%. a. What is the net operating income of last year's operations without making suggested changes by the sales manager? (10 points) b. What would the net operating income be if sale manger's suggested changes were made? (10 points)