Annick Lemarchand is considering the wholesaling of a leather handbag from Kenya.

She must travel to Kenya to check on quality and transportation. The trip will cost

€3,000. The cost of the handbag is €10. Shipping to France can be done through the postal system for €2 per handbag, or through a freight company. The freight company will ship a container that can hold up to 1,000 handbags at a cost of €1,000. However, it will charge €1,000 even if fewer than 1,000 handbags are shipped. Annick will try to sell the handbags to retailers for €20. Assume there are no other costs and benefits.

a. What is the break-even point, if shipping is through the postal system?

b. How many units must be sold if Annick uses the freight company and she wants to have a profit of €1,000?

c. At what output level would the two shipping methods yield the same profit?

d. Suppose a large discount store asks to buy an additional 1,000 handbags beyond normal sales. Which shipping method should be used and what minimum sales price should Annick consider when selling those 1,000 handbags?