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Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $160,000 per year.

5.	Refer to the original data. Assume that the company sold 30,000 units last year. The sales manager is convinced that a 12% reduction in the selling price, combined with a $73,000 increase in advertising, would increase annual unit sales by 50%.

a.	Prepare two contribution format income statements, one showing the results of last years operations and one showing the results of operations if these changes are made. (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.)
	Feather Friends, Inc., Contribution Income Statement Last Year Proposed 30,000 units ? units Total Per Unit Total Per Unit Sales $2,400,000 $80.00 ? ? Variable expenses 1,200,000 40.00 1,800,000 40.00 Contribution margin 1,200,000 40.00 (1,800,000) (40.00) Fixed expenses 160,000 Net operating income $1,040,000 $(1,800,000)

6.

Refer to the original data. Assume again that the company sold 30,000 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.30 per unit. He thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach.

The amount by which advertising can be increased is ?

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