Alpine Thrills Ski Company recently expanded its manufacturing capacity. The firm will now be able to produce up to 30,000 pairs of cross-country skis of either the mountaineering model or the touring model. The sales department assures management that it can sell between 24,000 and 28,000 units of either product this year. Because the models are very similar, the company will produce only one of the two models.

The following information was compiled by the accounting department.

Fixed costs will total $614,400 if the mountaineering model is produced but will be only $520,200 if the touring model is produced. Alpine Thrills Ski Company is subject to a 40 percent income tax rate.

3. How much would the variable cost per unit of the touring model have to change before it had the same break-even point in units as the mountaineering model? (Round your intermediate calculations and final answer to 2 decimal places.)

The variable cost per unit would have to INCREASE or DECREASE by __________

4. Suppose the variable cost per unit of touring skis decreases by 25 percent, and the total fixed cost of touring skis increases by 25 percent. Compute the new break-even point. (Do not round intermediate calculations. Round your final answer up to nearest whole unit.)

Model Mountaineering Touring Selling price per unit Variable costs per unit $147.00 86.80 $135.00 86.80 The variable cost per unit would have to by