Product X is selling for $40/unit. Its variable costs are $20/unit. Fixed costs associated with this product are $300,000/year. The company expects to sell 250,000 of Product X a year.

1. What is the current annual profit of Product X?
2. What is the breakeven point in units for Product X?
3. Suppose the company decides it wants to charge a 20% markup on cost. What would the target return price of Product X be?
4. The company decides not to change the price of Product X to the price calculated in #3 and keeps the $40/unit. But in response to competition, the price of Product X drops to $36 and the company sells 260,000 units that year. Calculate the price elasticity of demand based on the original price and data and the latest price and data.