A. Hydra Ltd is a company that sells sports glasses. The business profit calculation for last year is as follows:

Sales revenue (2,000 units x $25) $50,000

Less: Variable costs (20,000)

Contribution margin 30,000

Less: Fixed costs (22,000)

Profit 8,000

Hydra Ltd has decided to increase the price of its product to $30 per unit. The company management believes that if it increases its fixed advertising cost by $3,400, the next year's sales volume will increase to 2,200 units. Variable cost per unit will remain the same as last year.

[TASK]

i. Show the calculation of the expected profit for Hydra Ltd's operation next year.

Profit= $ 20600

ii. How many sports glasses would Hydra Ltd have to sell to earn as much profit next year as it did last year?

iii. Do you agree with Hydra Ltd's decision? Explain why or why not.