The McKnight Company manufactures and sells pens. Currently, $5,300,000$ units are sold per year at $$0\mathrm{.}50$ per unit. Fixed costs are $$900,000$ per year. Variable costs are $$0\mathrm{.}30$ per unit.

Read the requirements.

Requirement $1.$ What is the current annual operating income?

$($a$)$ Start by determining the formula to calculate operating income.

$[$ Units sold $($ Selling price $-$ Variable costs $)].$ Fixed costs $=$ Operating income

The current annual operating income is $$

$($b$)$ What is the current breakeven point in revenues?

Determine the formula to calculate the breakeven point in revenues.

Selling price $,$ Breakeven units $=$ Breakeven revenues

The current breakeven point in revenues equal $$

Compute the new operating income for requirements $2$ through $4.$

Requirement $2.$

A $$0\mathrm{.}04$ per unit increase in variable costs results in a new operating $$ of $$

Requirement $3.$

A $10\%$ increase in fixed costs and a $10\%$ increase in untis sold results in a new operating $$ of

Requirements

Consider each case separately:

a$.$ What is the current annual operating income?

b$.$ What is the current breakeven point in revenues?

Compute the new operating income for each of the following changes:

$2.$ A $$0\mathrm{.}04$ per unit increase in variable costs

$3.$ A $10\%$ increase in fixed costs and a $10\%$ increase in units sold

$4.$ A $20\%$ decrease in fixed costs, a $20\%$ decrease in selling price, a $30\%$ decrease in variable cost per unit, and a $45\%$ increase in units sold

Compute the new breakeven point in units for each of the following changes:

$5.$ A $10\%$ increase in fixed costs

$6.$ A $10\%$ increase in selling price and a $$20,000$ increase in fixed costs