Suppose a company produces three-wheelers for sale to commercial users at Ksh 35,000 . each. The plant is currently operating at 60% of its capacity of 80 units per year, at a total fixed cost of Ksh 600,000 and an average variable cost of Ksh 20,000 per unit. The firm is contemplating a change in product design that will increase the average variable cost by Ksh 1000. Also an advertising campaign will be launched at a cost of Ksh. 120,000 to announce that the new improved model will sell for Ksh. 2000 less than the old one. The company's economist estimates that these measures will increase sale to 90% of plant capacity. Assuming that the economist is correct;
a). What will be the effects of all these changes on the break-even sales volume?
b). Determine the effects of the changes on the company's annual profits.