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Question 2. (25 Marks) Laguna Inc. produces and sells a single product. The company's contribution format information statement for last year is provided below:

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Question 2. (25 Marks) Laguna Inc. produces and sells a single product. The company's contribution format information statement for last year is provided below: Sales (4,500 units*$32 per unit) Variable Expenses Contribution Margin Fixed Expenses Net Operating Income Required: $144,000 $93,600 $50,400 $33,600 $16,800 1) Compute the company's contribution margin ratio and break-even point in both units and dollar sales. (5 Marks) 2) The marketing manager suggests the company cut the selling price by $2 per unit and increase the advertising budget by $8,200 per year. He predicts that these two changes would increase annual sales by 40%. What is the overall effect on the company's net operating income of these changes? (8 Marks)

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