Thelma and Louise, Inc. (TAL) is suffering from the effects of increased local and global competition for its main product, a hair dryer that is sold in discount stores throughout the United States. The following table shows the results of TAL's operations for 2019.

# Units

10,000

Price per unit

$74

Variable cost per unit

$48

Units

Per unit

Total

Sales

10,000

$74

$740,000

Variable costs

10,000

$48

$480,000

Contribution margin

$260,000

Fixed costs

$174,000

Operating profit/(loss)

$86,000

1. Compute TAL's breakeven point in both units and dollars and compute the contribution margin ratio.
2. What would be the required sales, in units and in dollars, to generate a pretax profit of $100,000?
3. Assume a combined income tax rate of 30%. What would be the required sales volume, in both units and in dollars, to generate an after-tax profit of $75,000?
4. Refer to the original data.The manager believes that a $30,000 increase in advertising would result in a $120,000 increase in annual sales. If the manager is right, what will be the effect on the company's operating profit or loss?
5. Refer to the original data. The vice president in charge of sales feels that a 5% reduction in price in combination with a $40,000 increase in advertising will cause unit sales to increase by 40%. What effect would this strategy have on operating profit (loss)?
6. Refer to the original data. During 2019, TAL saved $4.50 of unit variable costs per hair dryer by buying from a different manufacturer. However, the cost of changing the plant machinery to accommodate the new part cost an additional $50,000 in fixed cost per year. Was this a wise change? Why or why not?