Sasance Louis has lately opened The Baggie Store in Hong Kong, a store that specializes in hand-made handbags. Sasanee has prepared the following analysis for her new store: Sales price per hand bag .......... $80 Variable expenses per hand bag ........... 32 Contribution margin per hand bag ..... 48 Fixed expenses per year: Shop rental .......... $30,000 Facility depreciation ... .... 14,000 Selling Expenses .. 40,000 Administrative Expenses 36,000 Total fixed expenses . ....... $120,000 Required: 1. How many handbags must be sold each year to break even? What does this represent in total sales dollar? (3 marks) 2. Prepare a CVP graph for the store from zero units up to 4,000 handbags sold each year. Indicate the total fixed expense, the total expense, the total sales, the break-even point, profit area and loss area on the graph. (6 marks) 3. Sasanee has decided that she must earn at least $36,000 the first year to justify her time and effort. How many handbags must be sold to reach this target profit? (2 marks) 4. Sasance now has two salespersons working in the store - one full time and one part time. It will cost her an additional $16,000 per year to convert the part-time position to a full-time position. Sasanee believes that the change would bring in an additional $50,000 in sales each year. Should she convert the position? (4 marks) 5. During the first year, the store sold only 3,000 handbags. The operating results follow: Sales (3,000 units) ... $240,000 Variable expenses .... 96,000 Contribution margin .. ... 144,000 Fixed expenses ... 120.000 Net operating income ...... ..." 24,000 (a) What is the store's margin of safety in terms of %? (2 marks) (b) What is the store's degree of operating leverage? (2 mark) (c) Sasanee is confident that with a more intense sales effort and with a more creative advertising program she can increase sales by 40% next year. What would be the expected percentage increase in net operating income? How much is the expected profit next year? Use the degree of operating leverage to compute your answer, otherwise no credit