The income statement for DryLand Company for 2015 appears below.

DryLand Company

Income Statement

For the Year Ended December 31, 2015

Sales revenue (40,000 units)......................................................................... $1,000,000

Variable expenses......................................................................................... 700,000

Contribution margin....................................................................................... 300,000

Fixed expenses.............................................................................................. 345,000

Net income (loss)........................................................................................... $ (45,000)

Instructions:

Answer the following independent questions and show computations using the contribution margin technique to support your answers:

1. What was the company's break-even point in sales dollars in 2015?

2. How many additional units would the company have to sell in 2016 (compared to 2015) in order to earn net income of $45,000?

3. If the company is able to reduce variable costs by $4.50 per unit in 2016 and other costs and unit revenues remain unchanged, how many units will the company have to sell in order to earn a net income of $45,000?

4. Assume that the Company maintains the variable cost and the number of units as in 2015 but wants to increase the profit to $60 000. What would the selling price have to be in order to reach the stockholders' desired profit level?