The Pantovich Company is not happy with last year's operating income of only $30,000. The selling price during the year was $15 per unit. The total variable costs were $180,000 and total fixed costs were $90,000. The sales manager wants to increase the selling price next year by 15% although she knows that the number of units sold would likely be reduced by 10%.

If her proposal is adopted and her assumption about volume of sales is correct, what would the new operating income be?   (HINT: Use the CM format income statement to list what you know, then solve for the unknowns you need to solve the problem.)

b. Giddings Company manufactures and sells a single product, Product G. The product sells for $60 per unit and has a contribution margin ratio of 40 percent. The company's monthly fixed expenses are $28,800.

If the selling price is reduced by 5%, variable costs per unit reduced by $1.00, and fixed costs increased to a total of $40,750, how many units would need to be sold to earn operating income equal to 10% of sales revenue?