The McKnight Company manufactures and sells pens.

Currently, 5,000,000 units are sold per year at $0.50 per unit.

Fixed costs are $900,000 per year.

Variable costs are $0.30 per unit.

Required

Consider each caseseparately:

	1a.	What is the current annual operating income?
	1b.	What is the present breakeven point in revenues?

Compute the net operating income or loss for each of the following changes:

	2.	A $0.06 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