Question 11/20 Marks) Pricher Corporation's income statement for last year appears below: $2,000,000 Sales (20,000 units). Cost of goods sold: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Gross margin ................ Selling and administrative expenses: Variable Fixed......... Net operating income $500,000 150,000 50,000 600,000 1.300.000 700,000 100,000 300,000 400.000 S 300.000 Required: Compute the following (each point is separate): a. If the company desires a net operating income next year of $600,000, how many sold? (4 Marks) b. If fixed selling and administrative expenses increase by $68,700 and unit sales 40%, what is the change in net operating income? (4 Marks c. What is the Gross margin Selling and administrative expenses: Variable 100,000 Fixed 300,000 400,000 Net operating income $300.000 Required: Compute the following each point is separate): a. If the company desires a net operating income next year of $600,000, how many units need to be sold? [4 Marks) b. If fixed selling and administrative expenses increase by $68,700 and unit sales will increase by 40%, what is the change in net operating income? (4 Marks) What was the degree of operating leverage last year? (4 Marks) d. Pricher Corporation's president assigned a management committee to analyze the situation and develop several alternative courses of action. The following three alternatives were presented to the president, only one of which can be selected. Determine which of the alternatives Pricher Corporation's president should select to maximize profit. (8 Marks) 1) Reduce the selling price by $20. The marketing department forecasts that with the lower price, 50% additional units could be sold. 2) Lower variable costs per unit by $25 by using less expensive materials. Because of the difference in materials, the selling price would have to be lowered by $40, and 40% additional units could be sold 3) Cut fixed expenses by $80,000 and lower the selling price to $90. As a result, 25% additional units could be sold