Question 1 Stephenson Limited produces a variety of products for the computing industry. The companys CEO plans to produce a new product, WiFi router and asked the controller to prepare some information and be ready to meet with him to discuss about it. In preparing for the meeting, the controller accumulated the following data: Selling price of a router $1,250 Direct materials per router $270 Direct labour per router $130 Variable overhead per router $80 Total fixed costs $120,000

Required: a) Calculate the contribution margin per unit, break-even point in units and in sales dollar.

b) Calculate the number of units that must be sold and the amount of sales revenue to earn $300,000 of profit.

c) Calculate the break-even point in units and in sales dollar if the company were to reduce variable costs by $220 per unit by investing in technology resulting in an overall increase of $20,000 in total fixed costs? d) The CEO believes the company can increase sales by 50 units if advertising expense is increased by $31,000 based on the original data. Justify whether the company should increase advertising expenditure.