IFL has recently developed sales of 'Fleur' Perfume in a recyclable atomiser which is sold alongside the companies traditional products of bottles of 'Fleur' Perfume and bottles of 'Rose' Perfume. The company is now considering the sale of 'Rose' Perfume in atomiser bottles. It is the company policy that any new product must be capable of generating sufficient profit to cover all costs, including initial marketing and advertising expenditure of 1,100,000. Current weekly production, with unit costs and selling prices, is as follows: output of Variable Fixed Selling units costs Costs Price Botte of Fleur 400,000 0.45 0.14 1.75 Atomiser of Fleur 96,000 0.50 0.23 1.25 Botte of Rose 280,000 1.00 0.18 1.50 Sales volume is equal to production volume. A 50 week trading year is assumed. Rates of absorption of fixed costs are based on current levels of output. All products have a similar cost structure. In order to produce 'Rose' in atomisers, the atomiser machine would require modification at a cost of 6500,000 which is to be recovered through sales within one year. Additional annual fixed costs of 6450,000 would be incurred in manufacturing the new product. Variable costs of production would be 50c per atomiser. Research has estimated demand at different selling price levels to be: Price per atomiser Maximum weekly demand (atomisers) 1.68 65,000 1.45 90,000 1.20 110,000