Question 2 (45) Fred is thinking of entering the soft drinks market in the area surrounding his cottage. He is going to call his company "Pop's Pop." He realizes that the soft drink industry is dominated by only three companies that keep the competition out by spending a great deal on advertising. Nonetheless, Fred is tempted by the high profit margin. He plans to sell his cola for $1.00 per bottle. Direct material and direct labour costs are $0.20 and $0.01 per bottle respectively. A fixed sales commission of $0.01 per bottle will be paid to sales people for sale of every bottle. He has to pay franchise fee for $50,000 and his other fixed costs are estimated at $30,000. He currently has the capacity to make and sell 170,000 bottles in a summer. In order to justify spending his time on this venture, rather than sitting on his dock, Fred needs to have an operating income of $20,000. Instructions a) What is Fred's break even in units? b) How many bottles must Fred sell to achieve his target income of $20,000? c) How much profit he can make at the current sale level of 170,000 bottles? d) Is Fred's plan feasible? Discuss and support your answer with calculations, if necessary. e) Show (a) to (d) above in a CVP graph. Include all numbers and descriptions. f) Determine the degree of operating leverage based on (C) above