A strike at a major supplier has caused a shortage of materials, so the current years production and sales are limited to 140,000 units. Top management is unable to reduce fixed cost (from original total) to partially offset the effect of the reduced sales on profits. Variable cost per unit is the same as last year (see above). The company has already sold 40,000 units at a selling price of $40 per unit.

1. How much of the fixed cost was covered by the total contribution margin of the first 40,000 units sold?
2. What contribution margin per unit will be needed on the remaining 100,000 units to cover the remaining fixed costs and to earn a target profit of $300,000 this year?
3. What would be your recommended selling price, assuming your variable cost are held constant, based upon your findings in (b)?