Bella Ltd, one of Elite Consultancys clients, manufactures and sells 25,000 units of its product FM12 at full capacity each year. The cost and selling price structure for this level of activity is as follows: at 25,000 units output ($ per unit) Manufacturing costs: Direct materials $14 Direct labour 13 Variable manufacturing overhead 4 Fixed manufacturing overhead 8 Total manufacturing costs 39 Selling costs: Sales commission 10% of sales revenue 6 Fixed 3 Administrative costs: Fixed 2 Total costs 50 Markup (20%) 10 Selling price 60 Given the significant impact of COVID-19 on FM12 sales, the marketing department of Bella Ltd has estimated the potential sales volumes which could be achieved at three alternative sales prices: Selling price per unit $70 $80 $90 Annual production and sales volume 20,000 units 16,000 units 11,000 units The following information is provided on the effect of changes in sales volume on cost behaviour: - Direct material: When production volume drops below 15,000 units per year, the direct material cost per unit will increase by 15% due to the loss of bulk discounts. - Direct labour: If production volume falls below 20,000 units per year, labour costs will decrease by 10% due to reduced bonus payments. Sales commission will stay the same at a rate of 10% of the sales revenue. - Fixed manufacturing overhead: If annual production volume gets below 20,000 units, then a machine rental cost of $10,000 per annum could be saved. This will be the only change in the total expenditure on fixed manufacturing overhead. - Fixed selling costs: If annual production volume falls below 24,000 units, a reduction in the part-time sales force would save $5,000 per year. This will be the only change in the fixed selling costs. - Variable manufacturing overhead: There would be no change in the unit cost for variable manufacturing overhead. - Administration costs: If production volume remains within 25,000 units, the total expenditure on administration will remain unchanged. - Inventory: Product FM12 is highly perishable, therefore no inventories are held. REQUIRED: When preparing the business report for Bella Ltd, it is crucial to address the following issues with supporting calculations. i. Determine the annual profit based on the selling price of $60 per unit. ii. Prepare a schedule to show the annual profit which would be earned with each of the three alternative selling prices. iii. Recommend the selling price which should be charged for a unit of product FM12 with your justifications. iv. Identify and describe three non-financial factors which the management of Bellas Ltd should consider before planning to operate below full capacity. One of these factors should have a positive impact on Bella Ltd.