First part: Orange County, Inc. sells its only product for $5 per unit. The variable cost per unit is $3 and the firm has fixed costs totaling $400.

Question to be answered: Assume that Orange County expects $300 of pretax profit by selling 350 units under its original assumptions (selling price $5, variable cost $3, and fixed cost of $400). The firm can decrease its fixed costs to $200 if it is willing to increase variable costs to $3.50 per unit. Should the company change its cost structure?