Best Water Limited is a provider of high-quality insulation material to trade and commercial establishments. It employs an army of sales agents who regularly work with architects and pitch their products. The sales agents are remunerated based on performance and are usually paid 20 percent of sales value. Manufacturing costs and overheads contributes to 30 percent of sales revenue. Business is affected by seasonality and the revenue generated varies per quarter is shown in the following table.

a. Calculate the pretax profit based on the data provided.
b. In year 3, the company wishes to replace its existing product by importing a higher quality product from overseas, which reduces production costs from 30 percent to 15 percent. Sales is forecast to increase by 25 percent. However, the government has introduced an additional import duty of 10 percent. What will be the additional profits earned by Best Water through year 3?

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Year 1 2 Quarter 1 2 3 4 1 2 3 4 Sales (in 1000s) 300 700 900 200 320 735 940 220