1. To increase operating income, the company is considering the following two alternatives:
   1. Reduce the selling price by an average of $2.10 per gallon. This action is expected to increase the number of gallons sold by 20 percent. (Under this plan, the manager would be paid their salary without a bonus.)
   2. Spend $3,400 per month on advertising without any change in selling price. This action is expected to increase the number of gallons sold by 10 percent. (Under this plan, the manager would be paid their salary without a bonus).

Note: Answer must be completed using the template below for both parts A and B.

Case Study Background Information Purple Cow operates a chain of drive-ins selling primarily ice cream products. The following information is taken from the records of a typical drive-in now operated by the company. Average selling price of ice cream per gallon Number of gallons sold per month Variable costs per gallon: Ice cream Supplies (cups, cones, toppings, etc) Total variable expenses per gallon Fixed costs per month: Rent on building Utilities and upkeep Wages, including payroll taxes Manager's salary, including payroll taxes but excluding any bonus Other fixed expenses Total fixed costs per month $15.70 3,100 $4.85 2.15 $7.00 $2,300.00 740.00 4,870.00 2,600.00 1,400.00 $11,910.00 Based on these data, the monthly break-even sales volume is determined as follows: $11,910 (fixed costs) =1,369 gallons or ($21,493) \$8.70 (contribution margin per unit)