Sales of the software have been good at 20,600 units a month, but the company has been losing money as shown below:

Sales (20,600 units $19 per unit)	$	391,400
Variable cost (20,600 units $5.9 per unit)		121,540
Contribution margin		269,860
Fixed expenses		283,600
Net operating loss	$	(13,740	)

The companys only variable cost is the $5.90 fee it pays to another company to reproduce the software on CDs, print manuals, and package the result in an attractive box for sale to consumers. Monthly fixed selling and administrative expenses are $283,600.The companys marketing manager has been arguing for some time that the software is priced too high. She estimates that every 10% decrease in price will yield a 20% increase in unit sales. The marketing manager would like your help in preparing a presentation to the companys owners concerning the pricing issue.

1. To help the marketing manager prepare for her presentation, she has asked you to fill in the blanks in the following table. The selling prices in the table were computed by successively decreasing the selling price by 10%. The estimated unit sales were computed by successively increasing the unit sales by 20%. For example, $17.1 is 10% less than $19 and 24,720 units are 20% more than 20,600 units. (Enter Operating losses preceded by a minus sign. Round your answers to the nearest whole dollar amount.)

3a. Compute the price elasticity of demand for the SpamBlocker software (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 5 decimal places.)

3b. Based on your calculations in Requirement 3a, what is the profit-maximizing price? (Round intermediate calculations to 5 decimal places. Round final answer to 2 decimal places.)

4a. The owners have invested $120,200 in the company and feel that they should be earning at least 4% per month on these funds. If the absorption costing approach to pricing were used, what would be the target selling price based on the current sales of 20,600 units? (Round intermediate calculations and final answer to 2 decimal places.)

4b. What do you think would happen to the net operating income of the company if this price were charged?