The company Volar inc. manufactures and sells a single answering machine. Here are the results established using the variable cost method for the most recent period.

	Total	Per unit	Percentage of sales
Sales (20,000 units)	1 200 000 $	60 $	100%
Less: variable costs	900 000	45	25%
Variable cost margin	300 000	15	75%
Less: fixed costs	240 000
Profit	60 000 $

Work to do :

1) Calculate the breakeven point (in units and dollars) of Voltar inc. for the last period.

2) Assume an increase in sales of $ 400,000 in the following period. If the patterns of cost behavior remain the same, by how much will the company's profit increase?

3) Use the starting data again. Suppose management wants the companys minimum profit to be $ 90,000 in the next period. How many units will the company have to sell to achieve this goal?

4) Use the starting data again. Calculate the company's safety margin in units and dollars.

5) Go back to the starting point. In an effort to increase sales and profits, the company is considering the possibility of using higher quality speakers. This would have the effect of increasing variable costs by $ 3 per unit. However, management could do without the services of a quality inspector, who receives an annual salary of $ 30,000. According to the sales manager, this quality speaker would increase annual revenues by 20%.

a) Calculate the new breakeven point in units and dollars. b) Assuming the changes described above take place, prepare a forecast of income for the next period. c) Would you recommend that these changes be implemented?