The condensed income statement for the Cullumber and Paul partnership for 2020 is as follows.

Cullumber and Paul Company Income Statement For the Year Ended December 31, 2020

Sales (270,000 units). $1,350,000

Cost of goods sold 900,000

Gross profit 450,000

Operating expenses

Selling $315,000

Administrative. 175,500 490,500

Net loss $(40,500)

A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.

1. Cullumber has proposed a plan to get the partnership out of the red and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Cullumber estimates that sales volume will increase by 25%. Compute the net income under Cullumber's proposal and the break-even point in dollars. (Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to 0 decimal places, e.g. 2,520.)

Net Income	$77625
Break-even point	$15390000

2. Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Cullumbers: (1) increase variable selling expenses to $0.59 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $43,000. Paul quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Compute the net income under Pauls proposal and the break-even point in dollars. (Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to 0 decimal places, e.g. 2,520.)

Net Income	$48800
Break-even point	$