Company produces educational games for kids since year 2008. Another company has introduced a new educational game to the market. Sohar Company is keen to produce and sell the same new educational game. The selling price will be 3 OMR per new game. Enough capacity exists in the company's factory to produce 16,000 units of the new game each month. Variable costs to manufacture one unit of the new game would be 1.25 OMR, and the fixed manufacturing costs of the new game is 35,000 OMR per month. The company estimated that the demand for the game will exceed the 16,000 units that the company is able to produce. To produce the additional quantity, a new space area should be rented and this will cost the company 1,000 OMR extra fixed cost per month and the variable costs will increase by 0.15 OMR per new game.

Required:

The CEO of Sohar Company has decided to rent the new space and produce the additional quantity of the new game. As a Senior Manager, the CEO asked you to:

1. Recommend the monthly units the company should sell to cover all fixed and variable costs for the new game.

2. Evaluate and recommend if the company should rent the new space area.