Houston-based Advanced Electronics manufactures audio speakersfor desktop computers. The following data relate to the period justended when the company produced and sold 42,000 speaker sets:

Sales	$	3,444,000
Variable costs		861,000
Fixed costs		2,250,000

Management is considering relocating its manufacturingfacilities to northern Mexico to reduce costs. Variable costs areexpected to average $18.00 per set; annual fixed costs areanticipated to be $1,986,000. (In the following requirements,ignore income taxes.)

Required:

1. Calculate the company’s current income and determine the levelof dollar sales needed to double that figure, assuming thatmanufacturing operations remain in the United States.
2. Determine the break-even point in speaker sets if operationsare shifted to Mexico.
3. Assume that management desires to achieve the Mexicanbreak-even point; however, operations will remain in the UnitedStates.

1. If variable costs remain constant, by how much must fixed costschange?
2. If fixed costs remain constant, by how much must unit variablecost change?

4. Determine the impact (increase, decrease, or no effect) of thefollowing operating changes.

Req.1

Calculate the company’s current income and determine the levelof dollar sales needed to double that figure, assuming thatmanufacturing operations remain in the United States. (Do not roundintermediate calculations and round your final answers to nearestwhole dollar.)

	Current income Required dollar sales

Req. 2

Determine the break-even point in speaker sets if operations areshifted to Mexico. (Do not round intermediate calculationsand roundyour final answer up to nearest whole number.)

	Break-even point units

Req. 3

Assume that management desires to achieve the Mexican break-evenpoint; however, operations will remain in the United States.

a. If variable costs remain constant, by how much must fixedcosts change? (Round your intermediate unit calculations to thenearest whole number and round your final answers to the nearestwhole dollar.)

b. If fixed costs remain constant, by how much must unitvariable cost change? (Round your intermediate unit calculations tothe nearest whole number and round your final answer to 2 decimalplaces.)

	a. Fixed costs by b. Variable costs by per unit

Req. 4

Determine the impact (increase, decrease, or no effect) of thefollowing operating changes.

	a. Effect of an increase in direct material costs on the break-evenpoint. b. Effect of an increase in fixed administrative costs on the unitcontribution margin. c. Effect of an increase in the unit contribution margin on netincome. d. Effect of a decrease in the number of units sold on thebreak-even point.