Tanner Company's Most Recent Contribution Format Income Statement Is Presented

Tanner Company's most recent contribution format income statement is presented below:
$\begin{array}{|l|r|}\hline \text { Sales } & \$ 75,000 \\\hline \text { Less: variable expenses } & \underline{45,000} \\\hline \text { Contribution margin } & 30,000 \\\hline \text { Less: fixed expenses } & \underline{36,000} \\\hline \text { Operating income } & (\$ 6,000) \\\hline\end{array}$
The company sells its only product for $15 per unit.There were no beginning or ending inventories.
Required:
a)Compute the company's break-even point in units sold.
b)Compute the total variable expenses at the break-even point.
c)How many units would have to be sold to earn a target operating income of $9,000?
d)The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000.Would you advise the increased advertising outlay?

Correct Answer:

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a)Contribution margin ratio = $30,000/$7...

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