Popeyes announced they plan to slow their rate of expansion, but not stop opening new stores. Assume annual fixed costs to operate a new store are expected to total $1,800,000. The average selling price of an item is $10 with an average variable cost of $7 each.

1. How many items must a new location sell in a year in order to break even? (5 marks)
2. Calculate the average margin based on the information above. If they wanted to add a new item to the store with a variable cost of $8 and maintain the same percentage margin, what would the retail price be? (5 marks)