Question 1:

The Doral Company manufactures and sells pens. Currently. 5,000,000 units are sold per year at 50.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit. Read the Requirement 1. What is the current annual operating income? (a) Start by determining the formula to calculate operating income. ( = Operating income Requirements Consider each case separately: 1. a. What is the current annual operating income? b. What is the current breakeven point in revenues? Compute the new operating income for each of the following changes: 2. A$0.06 per unit increase in variable costs 3. A 10% increase in fixed costs and a 10% increase in units sold 4. A 20% decrease in fixed costs, a 20% decrease in selling price, a 30% decrease in variable cost per unit, and a 40% increase in units sold Compute the new breakeven point in units for each of the following changes: 5. A 10% increase in fixed costs 6. A 10% increase in selling price and a $20,000 increase in fixed costs