$ QUESTION 1 Hernandez Company, maker of high-quality flash lights, has experienced steady growth over the last 6 years. However, increased competition has led Mr. Hemandez, the president, to believe that an aggressive campaign is needed next year to maintain the company's present growth. The company's accountant has presented Mr. Hernandez with the following data for the current year, 2013, for use in preparing next year's advertising campaign. Cost Schedules Variable costs Direct labor per flashlight 8.00 Direct materials 4.00 Variable overhead 3.00 Variable cost per r flashlight $15.00 Fixed costs Manufacturing 25.000 Selling 40,000 Administrative 70,000 Total fixed costs $135.000 Selling price per flashlight $25.00 Sales 2013 (20,000 flashlight). S500,000 Mr. Hernandez has set the sales target for the year 2014 at a level of $550,000 (22,000 flashlight). Instructions: (Ignore any income tax considerations) (a) What is the operating income for 2013? (b) What is the contribution margin per unit for 2013? (c) What is the break-even point in units for 2013? (d) Mr. Hernandez believes that to attain the sales target in the year 2014, the company must incur an additional selling expense of $10,000 for advertising in 2014, with all other costs remaining constant. What will be the break-even point in sales dollars for 2014 if the company spends the additional $10,000? (e) If the company spends the additional $10,000 for advertising in 2014, what is the sales level in dollars required to equal 2013 operating income