TC Co. produce several products. One division make XYZ product. The divisions projected income statement for the coming year is as follows

Sales (65,000 units) : $15,600,000

Less: Variable expenses: 8,736,000

Contribution margin 6,864,000

Less: Fixed expenses: 4,012,000

Operating Income $2,852,000

1. Calculate the contribution margin per unit and calculate the breakeven point in units. Repeat using the contribution margin ratio.

2. The manager has decided to increase the advertising budget by $140,000 and cut the average selling price to $200. These actions will increase sales revenues by $1 million. Will this improve the divisions financial situation?

3. Compute the margin of safety based on the given situation.

4. Compute the operating leverage based on the given income statement. If sales revenues are 20% greater than expected, what is the percentages increase in profits?