Sporting Goods is a retailer of sporting equipment. Last year, Terry's sales revenues totalled $2,500,000. Of this amount, approximately $1,612,000 were variable, while the remainder were fixed. Since Terry's Sporting Goods offers thousands of different products, its managers prefer to calculate the break-even point in terms of sales dollars rather than units.

1.	What Terry current operating income? (Prepare a contribution margin format income statement.)

2.	What is Terry contribution margin ratio?

3.	What is Terry break-even point in sales dollars? (Hint: The contribution margin ratio calculated in requirement 2 is already weighted by Terry actual sales mix.)

4. Terry top management is deciding whether to embark on a $200,000 advertising campaign. The marketing firm has projected annual sales volume to increase by 20% as a result of this campaign. Assuming that the projections are correct, what effect would this advertising campaign have on Terry annual operating income?