Kepler Corporation currently produces a single product, called AB, which sells for $120 per unit.

At forecast volume of 20,000 units, unit cost of AB is $72 ($40 variable), resulting in gross margin of $48.

Administrative costs, all fixed, are $320,000 per year.

The following questions are independent of each other.

Q1: Marketing department has suggested that cutting the sale price 10% and increasing advertising costs by $50,000/year would result in a 16% increase in sales above the 20,000 currently forecast. Is this plan advisable?Explain.

Q2: Production department has suggested that new technology could decrease variable cost per unit by 20%.Fixed costs would rise by $200,000/year. Compute breakeven point under this plan.

Q3: Kepler is considering introducing a new product, to be called CD.CD would sell for $200/unit, and have a variable cost of $96/unit.Because Kepler has excess capacity, fixed costs would not change.The company expects to sell two units of AB for every unit of CD sold. What would be the breakeven point in dollars if the new product is introduced?How many units of each would be sold at breakeven?