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

(Consider each case separately.)

1.	a. What is the present operating income for a year?
	b. What is the present breakeven point in revenue?

2.	Compute the new operating income for each of the following independent changes:
	a. A $0.05 per unit increase in variable costs.
	b. A 10% increase in fixed costs and a 10% increase in units sold.
	c. A 20% decrease in fixed costs, a 20% decrease in selling price, a 30% decrease in variable costs per unit, and a 40% increase in units sold.

3.	Compute the new breakeven point in units for each of the following changes:
	a. A 10% increase in fixed costs.
	b. A 10% increase in selling price and a $10,000 increase in fixed costs.

What is the present operating income for a year?

Start by determining the formula to calculate operating income.

[

x (

-

) ] -

=

Operating income