The following monthly information is available about a company$$s only product:

Sales $(2,600$ units$)$ $$390,000$

Variable Costs $221,000$

Contribution Margin $$169,000$

Fixed Costs $148,000$

Net Income $$21,000$

$$ 

 

Required:

$1.$ Compute the breakeven point in units and sales dollars.

$2.$ Management is contemplating the using cheaper direct materials in the product. This change would reduce variable costs by $$15$ per unit. The company$$s sales manager predicts that this would reduce the overall quality of the product and thus would result in a decline in sales to a level of $2,400$ units per month. Should this change be made? Answer in $1-2$ brief sentences and show your work to support your answer.