Last year, Leekys Pizza Ovens sold its ovens at a price of $800 each. The variable expenses for each oven were $500 and the annual fixed expenses totaled $270,000. Leekys Pizza Ovens had targeted a profit of $300,000 for the year but fell substantially short of that goal because product demand shifted resulting in sales of only 1,600 ovens.

1. If no changes are made to the selling price and cost behavior is unchanged, estimate the number of ovens that must be sold during the year to break even.
2. If no changes are made to the selling price and cost behavior is unchanged, estimate the number of ovens that must be sold during the year to attain the target profit of $300,000.

Leekys president assigned a management committee to analyze the situation and develop alternative courses of action for the coming year. The following three alternatives were presented to the president, but only one can be selected. Determine the profitability of each alternative and determine which of the alternatives Leekys Pizza Ovens president should select to maximize profit.

1. Reduce the selling price by $70. The marketing department forecasts that with the lower price, 2,400 ovens could be sold during the year. (Refer to original information).
2. Lower variable expenses per unit by $25 through the use of less expensive materials. Because of the difference in materials, the selling price would have to be lowered by $50 and sales of 2,100 ovens for the year are forecast. (Refer to original information).
3. Cut fixed expenses by $50,000 and lower the selling price by 5 percent. Sales of 2,000 ovens would be expected for the year. (Refer to original information).