The condensed income statement for the Phan and Nguyen partnership for 2016 is as follows:

A cost behaviour analysis indicates that 75% of the cost of goods sold is variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.
Instructions
(Round to nearest unit, dollar, and percentage, where necessary. Use the CVP income statement format in calculating profits.)
(a) Calculate the break-even point in total sales dollars and in units for 2016.
(b) Phan has proposed a plan to get the partnership "out of the red" and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Phan estimates that sales volume will increase by 25%. What effect would Phan's plan have on the partnership's profits and its break-even point in dollars?
(c) Nguyen was a marketing major in university. He believes that the sales volume can be increased only by intensive advertising and pro- motional campaigns. He therefore proposed the following plan as an alternative to Phan's: (1) increase variable selling expenses to $0.59 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $40,000. Nguyen quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. What effect would Nguyen's plan have on the partnership's profits and its break-even point in dollars?
(d) Determine which plan should be accepted. Explain your answer.

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PHAN AND NGUYEN LLP Income Statement Year Ending December 31,2016 Sales (240,000 units) Cost of goods sold Gross profit Operating expenses Selling Administrative Net loss $1,200,000 800,000 400,000 $280,000 150,000 430,000 s (30,000)