Sarah's Palace sells brand A. The variable cost per unit is $16, and the contribution margin is 20%. The fixed costs are $4,000,000 a year.

The size of market where brand A is sold is 20,000,000 units. Currently A sells 3,000,000 units.

3.1 (20 points)

What is the BEP in units?

What is the necessary market share for A to break even?

What is the profit?

3.2 (20 points)

The managers of Sarah' Palace want to hire 4 salespeople. Each one will receive a salary of $50,000 a year. They will also get paid with a commission of 15% of sales. The sales are expected to increase by 50%.

What is the new BEP in units?

What is the annual profit?