Buzby Corporation manufactures numerous products, one of which is called Epsilon-39. The company has provided the following data about this product:

Unit sales (a)		86,000
Selling price per unit	$	43.00
Variable cost per unit		25.00
Contribution margin per unit (b)	$	18.00
Total contribution margin (a) x (b)	$	1,548,000
Traceable fixed expense		1,080,000
Net operating income	$	468,000

Required:

a. Management is considering decreasing the price of Epsilon-39 by 5%, from $43.00 to $40.85. The companys marketing managers estimate that this price reduction would increase unit sales by 10%, from 86,000 units to 94,600 units. Assuming that the total traceable fixed expense does not change, what net operating income will Epsilon-39 earn at a price of $40.85 if this sales forecast is correct?

b. Assuming that the total traceable fixed expense does not change, how many units of Epsilon-39 would Buzby need to sell at a price of $40.85 to earn the same net operating income that it currently earns at a price of $43.00?