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The Central Valley Company is a manufacturing firm that produces and sells a single product. The companys revenues and expenses for the last four months

The Central Valley Company is a manufacturing firm that produces and sells a single product. The companys revenues and expenses for the last four months are given below.

Central Valley Company Comparative Income Statement
March April May June
Sales in units 6,300 5,800 7,200 8,600
Sales revenue $ 762,300 $ 701,800 $ 871,200 $ 1,040,600
Less: Cost of goods sold 405,450 378,972 453,024 530,706
Gross margin $ 356,850 $ 322,828 $ 418,176 $ 509,894
Less: Operating expenses
Shipping expense $ 64,100 $ 53,400 $ 67,600 $ 64,500
Advertising expense 89,500 89,500 89,500 89,500
Salaries and commissions 164,700 136,500 168,000 167,000
Insurance expense 15,500 15,500 15,500 15,500
Amortization expense 48,500 48,500 48,500 48,500
Total operating expenses $ 382,300 $ 343,400 $ 389,100 $ 385,000
Net income $ (25,450 ) $ (20,572 ) $ 29,076 $ 124,894

Required:

1. Management is concerned about the losses experienced during the spring and would like to know more about the cost behaviour. Develop a cost equation for each of the costs. (Do not round intermediate calculations. Round "Per Unit" answers to 2 decimal places.)

2. Assume that fixed costs are incurred uniformly throughout the year. Compute the annual break-even sales, and the profit if 80,500 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.)

3. Calculate the change in profit if the selling price were reduced by $11.00 each and annual sales were to increase by 7,600 units.

4. Determine the change in profit if the company were to increase advertising by $113,000 and if this were to increase sales by 7,600 units.

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