Thornton Corporation sells hammocks; variable costs are $63 each, and the hammocks are sold for $128 each. Thornton incurs $458,000 of fixed operating expenses annually.

Required

1. a1.Determine the sales volume in units and dollars required to attain a $62,000 profit.
2. a2.Prepare a income statement using the contribution margin format.
3. b.Thornton is considering implementing a quality improvement program. The program will require a $9 increase in the variable cost per unit. To inform its customers of the quality improvements, the company plans to spend an additional $12,400 for advertising. Assuming that the improvement program will increase sales to a level that is 5,800 units above the amount computed in Requirementa, prepare a budgeted income statement using the contribution margin format.
4. c.Determine the new break-even point in units and sales dollars as well as the margin of safety percentage, assuming that the quality improvement program is implemented.