Riveria Co. makes and sells single product. Current selling price is $32 per unit. Variable expenses are $20 per unit, fixed expenses total $43,200 per month. Sales volume for May is 4,100 units.

a) Calculate operating income for May

b) Calculate breakeven point in terms of units sold and total revenue

c) Change variable costs to drop to $14 per unit, but increase fixed expenses to $67,800.

• Calculate operating income at a volume of 4,100 units per month with the new cost structure
• Calculate breakeven point in units for new structure
• Why would you suggest that management seriously consider investing in the new system and accept the new structure
• Why might management not accept your recommendation but decide to maintain the old structure?