Question 1 Cost - Volume - Profit (30 minutes, 20 marks) Happy Twist Inc. produces a single product. The results of the company's operations for a typical month are summarized in contribution format as follows: Sales $540,000 Less: Variable Expenses $360,000 Contribution Margin $180,000 Less: Fixed Expenses $120,000 Operating Income $ 60.000 The company produced and sold 120,000 units during the month. There were no beginning or ending inventories. Required: 1. Compute the company's break-even point in both units and dollars. 2. Compute the sales in units that would be required to produce operating income of $90,000. 3. Compute (a) the margin of safety in dollars; (b) explain the relationship between the margin of safety and break-even; (c) explain the purpose of the margin of safety. 4. The sales manager is convinced that a $10,000 increase in the monthly advertising budget will result in an $50,000 increase in monthly sales. If the manager is right, what will be the effect on the company's monthly operating income/loss? (Use the incremental approach in preparing your answer.)