17.7 The following information relates to Carter Limited for the year to 30 April 2017: During 2018 the company would like to increase its sales substantially, but to do so it would have to reduce the selling price per unit by 20 per cent. The variable cost per unit will not change, but because of the increased activity the company will have to invest in new machinery which will increase the fixed costs by 30,000 per annum. Required: Given the new conditions, calculate how many units the company will need to sell in 2018 in order to make the same amount of profit as it did in 2017. 17.8 Puzzled Limited would like to increase its sales during the year to 31 May 2018. To do so, it has several mutually exclusive options open to it: - reduce the selling price per unit by 15 per cent; - improve the product resulting in an increase in the variable cost per unit of 1.30; - spend 15,000 on an advertising campaign; - improve factory efficiency by purchasing more machinery at a fixed extra annual cost of 22,500. During the year to 31 May 2017, the company sold 20,000 units. The cost details were as follows: These cost relationships are expected to hold in 2018. Required: State which option you would recommend and why