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Short Problem 5: Julia's PT Company manufactures PT equipment. Its most popular model, Flexibility, sells for $5,000. It bas variable costs totaling $2,500 per unit and fixed costs of $1,000 per unit, based on an average each time. Plant capacity can handle up to six runs a year for a total of 30,000 beds. costs A competitor is introducing a new PT equipment similar to Flexibility that will sell for S4,000 Management believes it must lower the price to compete. Marketing believes that the new price will increase sales by 25% a year. The plant manager thinks that production can increase by 25% with the same level of fixed costs. The company currently sells all the Flexibility beds it can produce (ie, no inventory). Required: a. What is the annual operating income from Flexibility at the current price of $5,000? b. What is the annual operating income from Flexibility at the new price of $4,000? c. If the selling price is reduced to $4,000, what is the target cost per unit for this new price if target operating income is 25% of sales