The condensed income statement for the Phan and Nguyen partnership for 2012 is as follows:

A cost behaviour analysis indicates that 75% of the cost of goods sold is variable, 50% of the selling expenses are variable, and 25% 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 2012.
(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 $6.25 because of competitive pressures. Phan estimates that sales volume will increase by 30%. 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 promotional campaigns. He therefore proposed the following plan as an alternative to Phan's: (1) increase variable selling expenses to $0.79 per unit, (2) lower the selling price per unit by $0.30, and (3) increase fixed selling expenses by $35,000. 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, 2012 Sales (200,000 units) Cost of goods sold Gross profit Operating expenses Selling Adlministrative Net loss $1,200,000 800,000 400,000 $280,000 160,000 440,000 (40,D()()) 多