Zhang Co. manufactures and sells a single product. During the last year, Zhang sold 50,000 units. Data regarding this product are as follows:

Sales	$2,500,000	$50 per unit
Variable Costs	$1,500,000	$30 per unit
Contribution Margin	$1,000,000	$20 per unit
Fixed Costs	$880,000
Net Income	$120,000

Required:

Consider each of the following situations independently. Answer all questions on the incremental basis.

1. Refer to the original data. Zhang is considering replacing some direct labour with new robotic equipment. The result will be a $5 per unit decrease in variable cost. The new robotic equipment will result in an increase in fixed costs of $260,000 per year. No change in sales is expected. Should the change be made?

2. Refer to the original data. Zhang is considering replacing its salaried sales force with commission-based salespeople. Zhang can reduce fixed costs by $150,000 per year if it was to pay an additional $4.50 per unit sold in commission. This change is expected to result in increased unit sales of 10%. Should the change be made?

3. Refer to the original data. Zhang is considering increasing the quality of its product and wants to enhance the materials used in its manufacture. This will result in an increase in variable costs of $4. To reflect the increased quality, Zhang is considering increasing the sales price by $6 per unit. Zhang intends to promote the higher quality product with an increase its advertising budget (fixed cost) by $120,000. Zhang expects these changes to increase overall sales by 4,000 units. Should the changes be made?