The

Westover

Company manufactures and sells pens. Present sales output is

5,300,000

units per year at a selling price of

$0.50

per unit. Fixed costs are

$910,000

per year. Variable costs are

$0.30

per unit.Required

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Requirement 1. (a) What is the present operating income for a year?

Start by determining the formula to calculate operating income.

[

Units sold

x (

Selling price

-

Variable costs

) ] -

Fixed costs

=

Operating income

The current annual operating income is

$150000150000.

Requirement 1. (b) What is the present breakeven point in revenues?

Determine the formula to calculate the breakeven point in revenues.

Breakeven units

x

Selling price

=

Breakeven revenues

The present breakeven point in revenues equals

$22750002275000.

(Hold all decimals in interim calculations. Round your final answer to the nearest whole dollar.)

Requirement 2. Compute the new operating income or loss for cases a, b, and c. (Use parentheses or a minus sign to show an operating loss.)

a. A

$0.05

per unit increase in variable costs results in a new operating income or loss of

$nothing.