Use the basic information above and adjust it for each of the following proposals. Treat each alternative independently. Determine the impact on the basic model of each of the alternatives. In addition calculate 1) Break-even point in units; 2) Break-Even Sales; 3) the Margin of Safety; and the Degree of operating leverage.

1.Product quality could be improved if a different direct material was used. The change would result in an increase of $3 per unit, but marketing thinks that the increased quality would support a 20% increase in the selling price without impacting sales volume.

2.The Company is discussing the construction of a new, automated manufacturing. The new plant would slash variable production expenses by 40%, but it would cause fixed production expenses to increase by $80,000.

3.The president feels that if they changed the product packaging it could raise its unit selling price by 5%. The cost of the new product packaging would increase variable costs by $.0.50 per unit.

4.Marketing believes that a new advertising campaign that costs $25,000 would generate a 25% increase in sales volume.

5.Sales believes that a 10% reduction in selling price will generate a 35% increase in sales volume.

6.Human Resources believes that the sales commission should be adjusted and proposes to increase the commission from 1% to 5% of sales, at the same time reducing the base salary of the sales force by $10,000. HR also believes the added sales incentive will boost sales volume by 8%.

Current income statement for the year ended December 31, 2016 $770,000 Sales (35,000 units) Variable Expenses: Production 297,500 Selling and admin 87,500 Contribution Margin 385,000 Fixed Expenses Production 190,000 Selling and admin 85,000 $110,000 Net Operating Income