XYZ Company provides the following data:

Sales Price - $10

Variable Cost per unit - $6

Fixed Cost - $20,000

Units sold - 6,000

a) - What is the contribution margin per unit for the above data and what is meant by contribution margin per unit?

b) -How many units need to be sold if the company wants to earn an after tax income of $80,000. The tax rate is 40%.

c) - By how much should sales price increase if the company wants to raise its advertising costs (fixed cost) by $8,000 while selling the same number of units and keeping the same level of profit?

d) - If the company doesnt change its sales price of $10, and cannot cut costs, what else would you advise the company to do to cover the anticipated extra $8,000 fixed cost to keep the same level of profit? Show by calculation why your advice is correct