Referring to the Cranberry Company of the previous problem: a. Calculate the DOL when sales are 20%, 30% and 40% above breakeven. b. Suppose automated equipment is added which increases fixed costs by $20,000 per month. How much will total variable cost have to decrease to keep the breakeven point the same? c. Calculate the DOL at the same output levels used in part a. d. Comment on the differences in DOL with and without the additional equipment.

Previous problem

Cranberry Wood Products Inc. spends an average of $9.50 in labor and $12.40 in materials on every unit it sells. Sales commissions and shipping amount to another $3.10. All other costs are fixed and add up to $140,000 per month. The average unit sells for $32.00.

a. What are Cranberry's contribution and contribution margin?

b. What is the firm's breakeven point in units?

c. Calculate the dollar breakeven point in two ways.

d. Sketch the Breakeven Diagram.