The Hollywood Hat Company produces a top hat, the Star Topper that sells for $130. Operating income for 2018 is as follows:

Sales revenue ($130)	$910,000
Variable cost ($60 per hat)	420,000
Contribution margin	490,000
Fixed cost	380,000
Operating income	$110,000

Hollywood Hat Company would like to increase its profitability over the next year by at least 20%. To do so, the company is considering the following options:

Replace a portion of its variable labor with an automated machining process. This would result in a 20% decrease in variable cost per unit but a 15% increase in fixed costs. Sales would remain the same.

Spend $50,000 on a new advertising campaign, which would increase sales by 10%.

Increase both selling price by $10 per unit and variable costs by $8 per unit by using a higher-quality silk material in the production of its hats. The higher-priced hat would cause demand to drop by approximately 10%.

Add a second manufacturing facility that would double Hollywood Hats fixed costs but would increase sales by 60%.

Required

a. Evaluate each of the alternatives considered by Hollywood Hat.

b. Do any of the options meet or exceed Hollywood Hats targeted increase in income of 20%?

c. What should Hollywood Hat do?

Your answer should address each requirement (remember to show your work) and your submission should be in one Word file.