Software Solutions, Inc., was started by two young software engineers to market SpamBlocker, a software application they had written that screens incoming e-mail messages and eliminates unsolicited mass mailings. Sales of the software have been good at 20,400 units a month, but the company has been losing money as shown below:

Sales (20,400 units $18.97 per unit)	$	386,988
Variable cost (20,400 units $5.90 per unit)		120,360
Contribution margin		266,628
Fixed expenses		254,000
Net operating loss	$	(12,628)

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 $254,000.

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.

Required:
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, $17.07 is 10% less than $18.97 and 24,480 units are 20% more than 20,400 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 $120,000 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 20,400 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?