WHAT$-$IF ANALYSIS

$4.$ The president of Poleski would like to know the effect that each of the following suggestions for improving performance would have on contribution margin per unit, sales needed to break even, and projected net income for next year. Each change should be considered independently. Reset the Data Section to its original values after each suggestion is analyzed. Fill in the table following the suggestions with the results of your analysis.

a$.$ The president suggests cutting the product's price. Since the market is relatively sensitive to price, $"...$ a $10\%$ cut in price ought to generate a $30\%$ increase in sales $($to $156,000$ units$).$ How can you lose?"

b$.$ The sales manager feels that putting all sales personnel on straight commission would help. This would eliminate $$77,000$ in fixed sales salaries expense. Variable sales commissions would increase to $$2\mathrm{.}00$ per unit. This move would also increase sales volume by $30\%.$

c$.$ Poleski's head of product engineering wants to redesign the package for the product. This will cut $$1\mathrm{.}00$ per unit from direct materials and $$0\mathrm{.}50$ per unit from direct labor, but will increase fixed factory overhead by $$100,000$ for additional depreciation on the new packaging machine. The package redesign would not affect sales volume.