ABC manufactures and sells adjustable canopies that attach to motor homes and trailers. For its current year budget, ABC estimated the following:

Selling price Rs. 20,000

Variable cost per canopy 10,000

Annual fixed costs 50,00,000

Net Income 1,20,00,000

Income tax rate 40%

The May financial statements reported that sales are not meeting expectations. For the first five months of the year, only 350 units had been sold at the established price, with variable costs as planned, and it was clear that the net income projection for current year would not be reached unless some actions were taken. A management committee presented the following two mutually exclusive alternatives to the president.

• Reduce the selling price by Rs. 2000. The sales organization forecasts that at this significantly reduced price, 2700 units can be sold during the remaining seven months of the year. Total fixed costs and variable cost per unit will stay as budgeted.

• Lower variable cost per unit by Rs. 500 through the use of less expensive direct materials and slightly modified manufacturing techniques. Reduce the selling price by Rs. 1500 and sales of 2200 units are expected for the remaining seven months of the year. Total fixed costs will stay as budgeted.

Required:

1. If no changes are made to the selling or cost structure, determine the number of units that ABC must sell

(1) to break even

(2) to achieve its net income objective.