Alyx Jones has been reviewing possible manufacturing sites for the Mend Messenger bag. Mend is a social enterprise founded by Invisible Children, based in San Diego (USA) and geared toward improving the quality of life for women in Uganda. After a career in retail fashion, Alyx Jones joined Mend in 2012 to support social causes using her business school education. The Messenger, which retails for US$250, is an 18oz (0.5kg) canvas bag, handmade by women in Gulu, a city in northern Uganda. Mend's lease on the current factory is about to end and, given the increased demand for the Messenger, the premises are no longer suitable. After visiting several facilities, Alyx narrows the options to three sites. Option 1 would have annual fixed costs of $130,500 and is expected to produce Messenger bags at a variable cost of $105 per unit. Option 2 would have annual fixed costs of $200,000 and a variable cost of $65 per unit.' Option 3 has fixed costs of $350,000 and a variable cost of $45 per unit. Fixed costs include lease payments, utilities, insurance, security and the supervisor's salary. Variable costs include materials, labour and some overhead. The annual production capacities of Options 1, 2 and 3 are 5,000 bags, 10,000 bags and 25,000 bags, respectively. Required 1. Offer some reasons as to why the cost structures differ across the three factory sites. 2. What is the break-even point in sales revenues and units for each option? 3. What are the required sales to achieve a targeted annual surplus of $200,000? 4. If expected sales are 4,000 bags, what is the margin of safety (in units) for each option