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Mettel Products sells 100,000 flash drives annually to industrial distributors who resell the drives to business customers for $40 each. The distributors margins are 25%.

Mettel Products sells 100,000 flash drives annually to industrial distributors who resell the drives to business customers for $40 each. The distributors margins are 25%. Mettel Products cost of goods sold is $10.00 each. Mettels total variable costs (including selling costs) are $15.00 per drive. What is the gross margin (in percentage) enjoyed by Mettel Products on its drives? [Note: A firms margin on a product is typically calculated as a percentage of the firms selling price.] Mettel is considering increasing its annual advertising spending from $75,000 to $150,000. How many additional flash drives would it need to sell in a year in order to break-even? Now if instead of increasing its advertising spending, Mettel decides to reduce its price by $3 per drive, how many additional units would it need to sell in order to break even?

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