Sunland Orthotics Company distributes a specialized ankle support that sells for $40. The companys variable costs are $30 per unit; fixed costs total $320,000 each year.

a1) Calculate contribution margin ratio (Round ratio to 2 percentage places, eg 0.38=38%) Contribution margin ratio _____ %

a2) If sales increase by $52,000 per year, by how much should operating income increase? (Use the rounded contribution margin ratio calculated in the previous part.) Change in operating income $_____

b)Last year, Sunland sold 34,000 ankle supports. The companys marketing manager is convinced that a 10% reduction in the sales price, combined with a $45,000 increase in advertising, will result in a 28% increase in sales volume over last year. Compute the projected income. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Projected income $______

Should Sunland implement the price reduction? Sunland (should/should not) implement the price reduction because the estimated operating income is (less/more) than the current operating income.