Lanza Company expects to produce and sell 18,000 units (a year) of a new product for $95 per unit. Lanzas variable costs will $30 per unit for labor and $15 per unit for materials. Its fixed costs, at the current level of production and sales, are $40 per unit. A recent marketing study suggested that the company can increase its sales by 5,000 units a year for each $5 reduction in selling price. Lanza pays income taxes at a rate of 30%.

a. What is Lanzas net income (loss) at the expected level of production and sales?

b. What is Lanzas prospective break-even point in both unit sales and dollar sales?

c. Assuming that the marketing study is correct, what is the maximum profit that Lanza can earn yearly? How many units would Lanza sell and at what price in order to generate this profit?