Exercise 2 An Italian producer of extra-virgin olive oil wants to open a commercial subsidiary in Germany. The company thinks that the transfer price (i.e. the price of goods and services exchanged between a parent company and its subsidiaries, and charged to the latter in this case) of its best olive oil to the subsidiary would be about 1.80 per bottle (cost for the subsidiary) and that sales agents would be paid a commission of 15% on an average net selling price of 8.00 (charged to supermarkets). The annual rent of the offices would be around 50,000 and salaries would amount to 200,000. a. Assuming, for the sake of simplicity, that the subsidiary wouldn't incur other significant costs, show, in mathematical form, the revenue, costs, and profit functions (4 points) Calculate the following (showing your calculations): b. Unit contribution of each sale, in terms of both euros and percentage (5 points) c. Break-even point in terms of both units and euros (4 points) d. Clearly show, with the appropriate legends and axes' labels, how you can obtain the same results graphing all the 5 relevant functions: revenues, fixed costs, variable costs, full costs, profit (6 points) c. The Area Manager for Germany thinks that, given the quality of the olive oil, they could possibly raise the selling price in order to lower the break-even by 10% without affecting significantly the clients' willingness to buy it; how much would be the percentage increase in price (two decimals) needed to reach this objective? (6 points)