Elmton Recently Sold 70,000 Units,generating Sales Revenue of $4,900,000

Elmton recently sold 70,000 units,generating sales revenue of $4,900,000.The company's variable cost per unit and total fixed cost amounted to $20 and $2,800,000,respectively.Management is in the process of studying the dollar impact of various transactions and events,and desires answers to the following independent cases:
Case no.1: Management wants to lower the firm's break-even point to 52,000 units.If all other costs remain constant,what must happen to fixed costs to achieve this objective?
Case no.2: The company anticipates a $2 hike in the variable cost per unit.If all other costs remain constant and management desires to maintain the firm's current break-even point,what must happen to Elmton's selling price? If selling price remains constant,what must happen to the firm's total fixed costs?
Required:
A.Answer the two cases raised by management.
A.Case no.1:
Selling price per unit: $4,900,000 / 70,000 units = $70
Unit contribution margin: $70 - $20 = $50
Current break-even point: $2,800,000 / $50 = 56,000 units
New level of fixed cost: X / $50 = 52,000 units;X = $2,600,000
Fixed costs must decrease by $200,000 ($2,800,000 - $2,600,000).
Case no.2:
To keep the same break-even point,the contribution margin must remain at $50.Thus,the selling price must increase to $72 to offset the $2 hike in variable cost.
Break-even: Fixed cost / $48 = 56,000 units;fixed cost = $2,688,000
Fixed costs must fall by $112,000 ($2,800,000 - $2,688,000)if the selling price remains constant.
B.1.Decrease
2.Increase
3.No effect
B.Determine the impact (increase,decrease,or no effect)of the following operating changes on the items cited:
1.An increase in variable selling costs on income.
2.A decrease in direct material cost on the unit contribution margin.
3.A decrease in the number of units sold on the break-even point.