P4.4 (LO 1, 2), AN Most manufacturing companies have gross margin goals, and Murphy's is no different. Mur-phy's makes lightweight backpacks that are suitable for a number of purposes. Management at the companyhas dictated a strict 60% gross margin goal, and, to date, it has been able to achieve it. Some of the company'sfinancial information is as follows.Sales$625,000Variable selling expenses$2.50/unitFixed selling, general, and administrative expenses$120,000Requireda. Given the above information, what is the most Murphy's can incur in manufacturing costs and still meetits gross margin goal?b. If the fixed portion of Murphy's manufacturing cost is $87,500, what combination of selling price andvariable manufacturing cost would fit the corporate gross margin percentage goal, assuming sales volumeis 25,000 units?c. Assume now that instead of having a corporate gross margin goal, the company switches to a contributionmargin (CM) goal. If this new CM goal is still set at 60%, will the company meet it under the sales, volume,and cost situation described above?d. Company management has recently noticed that accidents in the factory have been happening quite fre-quently. As a result, they are considering the addition of another supervisor in the plant. How would thisaffect the company's gross margin percentage? If plant employees are part of a profit-sharing plan, howmight employees react to this move?P4.5 (LO 1, 2, 4), AN Palo's is the new favorite pizza, pasta, and sub place in town! Everyone raves about the gener-ous portions and the delicious flavors of this restaurant's classic, go-to eats. After one year of operations, the manager,Laticia, wants to evaluate what has gone well and what could go better. She notes that while pizza represents thecompany's biggest sales volume item, it isn't necessarily the most profitable item. Alternatively, pasta, while not thebiggest seller, does generate a very high contribution margin. Laticia is struggling with how to balance these twoseemingly opposite products in terms of their profitability, while recognizing that subs are also becoming popularamong the usual crowd. Here are the current contribution margins for each of the following three products.PizzaPasta SubContribution margin per unit$7$9$5Laticia knows that for every two sub sandwiches sold, Palo's sells three orders of pasta and five pizzas. She alsoknows that if she wants to keep her management position, and possibly even get another raise, she's going to haveto help Palo's manage its growing costs. The operating costs, outside of the food costs, came to $2,880 last month.She has overheard the owner grumbling that this month and going forward, those costs are expected to increase.Required(Round to 2 decimal places where necessary.)a. Determine the break-even point in units for each of the three products.b. Recognizing that fixed costs are expected to increase, project a 20% increase in fixed costs over last month,and determine a new break-even point in units for each of the three products. How many additional piz-zas, pasta orders, and subs need to be sold just to cover the additional fixed costs?c. Suppose Palo's raises the selling price for each product to a level that generates a 20% higher contributionmargin for each product (compared to the current amount). In light of the 20% higher fixed costs, wouldthat help keep break-even volumes closer to what they were originally (in part (a))? Could the companyhave any issues as a result of this implementation?d. In order to regain some of the lost profitability caused by rising fixed costs, the owner is considering reduc-ing portion size for the pastas and subs instead of raising any selling prices. Discuss (1) whether this couldimprove Palo's profitability if everything goes well, and (2) what could go wrong with this strategy. Clearlystate your opinion as to whether this might be a good plan or not. Evaluate an income statement forP4.3 (LO 1, 2), AN An intern at the bakery is tasked with creating profitability information for a new spe-cialty cake. To create this new product, the bakery needs to rent a special oven, costing $500/month. Notincluding the oven, the cost to make one cake would be around $15, including direct materials, variableutility costs, and direct labor. No other bakery in the area is currently creating these cakes, so the bakerymanager feels confident that there is a market for them. The intern, however, is not confident with her CVPассuracy.Problems 4-33skills. Still, she tries. She calculate the following monthly profit projection, based on an assumption of selling40 specialty cakes in a month at a selling price of $30 each:Sales$ 1,200Less: Variable costs20,000Contribution margin(18,800)Less: Fixed costs15Operating income (loss)$(18,815)Requireda. What aspects of the intern's work, if any, did she do correctly?b. What aspects of her projection are incorrect, if any? If there are any errors, please explain and correct themin order to show an accurate projection.c. The intern presented her corrected projection from part (b) to the manager of the bakery. Given this newinformation, does it look like this cake would be a good addition to the bakery? What additional consider-ations should the manager make before moving ahead with this product addition?P4.4 (LO 1, 2), AN Most manufacturing companies have gross margin goals, and Murphy's is no different. Mur-phy's makes lightweight backpacks that are suitable for a number of purposes. Management at the companyhas dictated a strict 60% gross margin goal, and, to date, it has been able to achieve it. Some of the company'sfinancial information is as follows.Comparing profitability using grossmargin versus contribution margingoals.Sales$625,000Variable selling expenses$2.50/unitFixed selling, general, and administrative expenses$120,000

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The CVP (Cost volume profit) analysis is one of the vital techniques of management accounting. It…