Sales(240,000 units) $1,200,000

cost of goods sold (COGS) 800,000

Gross profit 400,000

Operational expenses:

Selling expenses $280,000

Administrative expenses $150,000

430,000

Net loss ($30,000)

The analysis of the behavior of the costs indicates that the following are variables: 75% of the cost of the merchandise sold, 50% of the selling expenses and 25% of the administrative expenses.

Case instructions: Round to the nearest unit, nearest percent, or nearest dollar. Submit the income statement in CVG (cost-volume-profit) format, with the earnings computation.

c) Paul's concentration in his high school was in marketing. He believes that sales volume can only be increased by an intensive advertising campaign, therefore he proposed the following plan as an alternative to Peri's: (1) increase variable selling expenses to $0.59 per unit; (2) reduce the sales price per unit by $0.25; and (3) increase fixed selling expenses by $40,000. Paul cited an old marketing report that stated that sales would increase by 60%. If these changes were made, what would be the effect of the proposed changes in Paul's plan on the breakeven point in dollars and the profits of the partnership?