Eurospan Company manufactures and markets a single product. Market competition for the company's product is now intense coming mainly from UK sellers of the product. The CEO needs to find a way to address the growing competition facing Eurospan Company. He has asked you as the Accounting Manager to assess whether it would be desirable to either a) decrease the selling price of the product by 5% or b) to increase the salesperson's commission by 25%. Eurospan Company wants to maintain its present profit level. The yearly fixed costs amount to 250,000 and you are given the following per unit information:

Materials 8.00

Variable labour costs 4.00

Variable overhead costs 2.00

Salesperson's commission (10% of selling price) 2.00

Selling price 20.00

Presently the company sells 90,000 units of the product using 60% of its capacity.

REQUIRED: Which of the two suggestions a) or b) do you recommend assuming Eurospan Company wants to maintain the present level of profit? Show all calculations. [12 marks]