Problem: Tanner Company's most recent contribution format income statement is presented below:
Sales $75,000; Variable expenses $45,000; contribution margin $30,000; fixed expenses $36,000; net operating loss $(6,000).
The company sells its only product for $15 per unit. There were no beginning or ending inventories.
Required:
1) Compute the company's break-even point in units sold.
2) Compute the total variable expenses at the break-even point.
3) How many units would have to be sold to earn a target profit of $9,000?
4) 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?