Richmond Hill Geese Inc. makes and sells top of the line winter jackets for $500. Variable costs are $240 per jacket and fixed costs are $800,000. They were expecting to sell 5,000 jackets again this year, the same as the last 4 years, however, they are considering making a better-quality jacket and raising the price by 20% to $600. This improvement would require extra advertising of $300,000 to a total (new) Fixed cost of $1,100,000. (Assume VC stays the same)-Determine: (5 marks)

The profit they make selling 5,000 of the original jackets at $500 with VC of $240. (1)

If they raise the price to $600 (and incur the new fixed costs), by how much can sales decrease (from part a) to make the same amount of profit as in part a. (3)

What is the percentage sales can decrease (from part a) to make the same amount of profit as in part a? (1)