Barron Company's Current Year's Income Statement Is as Follows In an Attempt to Improve the Company's Profit Performance,management Is

Barron Company's current year's income statement is as follows:
$\begin{array}{llr} \text {Sales \( (5,000 \) units \( \times \$ 15) \) } &&\$75,000\\ \text { Less variable expenses: } &\\ \text { Cost of goods sold: } &\\\text { Direct materials } & \$ 15,000 \\\text { Direct labour } & 10,000 \\\text { Variable factory overhead } & 10,000 \\\text { Selling and administrative } & \underline{2,500} &\underline{37,500}\\ \text {Contribution margin}&&\$37,500\\ \text {Less fixed expenses:}\\ \text {Factory overhead}&\$10,000\\ \text {Selling and administrative}&\underline{15,000}&\underline{25,000}\\ \text {Net income (loss)}&&\underline{\$12,500}\end{array}$
In an attempt to improve the company's profit performance,management is considering a number of alternative actions.
Determine the effect of each of the following on monthly profit.Each situation is to be evaluated independently of all the others.
a.Purchasing automated assembly equipment.This action should reduce direct labour costs by 40 percent.It also will increase variable overhead costs by 10 percent and fixed factory overhead by $2,500.
b.Reducing the unit selling price by $2 per unit.This should increase the monthly sales by 5,000 units.Fixed factory overhead will increase by $1,500.
c.Increase fixed selling and administrative expenses by $1,000 for advertising costs.The number of units sold will increase to 8,000 units.

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