"Well, I'd like to encourage our sales force to push them a little bit. If we increased the sales commissions on these chips by 25%, I think we could increase sales by 7.5%. Alternatively, we could spend an additional $160,000 in fixed advertising, which would raise our sales by about 6%. Would either of those increases in cost be worthwhile? Which would be better for us?" D E F G H | 1,947,563 B 1 Roberts Chips Co. 2 Sweet Potato Chip Division 3 Operating Results for Quarter 3 4 5 Revenues $ 6 Cost of Goods Sold: 7 DM $ 482,000 8 DL $ 151,725 9 MOH $ 315,000 $ 10 Gross Margin $ 11 Selling and Admin $ 12 Division Operating Income $ 13 14 Units sold 948,725 998,838 764,000 234,838 325,000 15 16 17 18 19 20 21 Most recent quarter Sheet1 Ready FO 1. What is the contribution Margin for the new line of sweet potato chips? 2. What is the breakeven amount for the sweet potato chips in dollars and units? 3. What is the margin of safety for the sweet potato chips in both dollars and units? 4. What is the degree of operating leverage for the sweet potato chips? 5. How much would operating income increase if sales increased by 15%? 6. What would be the effect on the sweet potato line's net income if the company increased sales commissions as in Scott's first alternative? 7. What would be the effect on the sweet potato line's net income if the company increased advertising expense as in Scott's second alternative? D E F G H if sales commissions increased by 25%, sales will increase by 7.5% or spend 160,000 more to increase sales 1,947,563 A B 1 Roberts Chips Co. 2 Sweet Potato Chip Division 3 Operating Results for Quarter 3 4 5 Revenues ($5.99 per unit) $ 6 Cost of Goods Sold: 7 DM $ 482,000 8 DL $ 151,725 9 MOH $ 189,000 10 variable expenses ($0.39 per unit) $ 126,000 $ 11 Gross Margin $ 12 Selling and Admin $ 687,600 13 commissions ($0.24 per unit) $ 76,400 $ 14 Division Operating Income $ 15 16 Units sold 17 total fix cost $ 876,600 18 CM $ 1,111,438 948,725 998,838 764,000 234,838 325,000