The Ice Cream Company produces super-premium ice cream for a local market in which it is sold through high-end gourmet and specialty food outlets. The company works with the retailers to carefully estimate demand for various flavors. The company holds no inventory and the retailers' volumes of sales determine the number of deliveries per week. The mix of ice cream flavors seems to be based on consumer preferences that remain relatively constant and does not vary much over time. The small factory has floor space to produce 30,000 pints of ice cream a month, but the factory has two lines of equipment that can make and package only 18,000 (9,000 each line). She has three freezer-equipped vans, each of which can deliver 6,000 pints of ice cream to the retailers each month. The company generally operates between 12,000 and 16,000 and averages 15,000 pints of ice cream a month. The fixed factory costs include supervisory salaries, insurance and rent on the building and equipment, including manufacturing and delivery equipment. Administrative and selling costs are primarily fixed salaries. Direct costs include hourly direct labor and direct materials (consisting of ice-cream ingredients and packaging materials). Variable overhead costs include electrical power mostly for the ice cream makers and packaging equipment. It also includes fuel for the delivery trucks and indirect hourly labor. $3.0 15,000 1.0 0.5 0.5 Revenue/Cost Structure Average price per pint Average Sales (pints) Variable manufacturing costs: Ingredients and packaging per pint Direct labor per pint Variable overhead per pint Fixed costs: Supervision and insurance Factory rent Two automated ice cream makers Two automated packaging machines Three delivery vehicles Administrative and selling costs 2,000 2,000 2,000 1,000 1,800 3,500 1000 pints of Sarah's sales are plain vanilla ice cream, and this flavor seems to have a harder competition than other flavors. Even though all flavors have the same unit variable cost, Sarah is considering dropping the price of the vanilla ice cream from $3.0 to $2.5 per pint. On the optimistic end, she believes that the company can increase sales of vanilla ice cream to 4,000 pints with such a drop in price. Answer the following three sub-questions Scenario-a: If her optimistic scenario proves to be true, is the price cut worth pursuing? Show the impact on operating profit. Scenario-b: However, she is worried about the less optimistic consequences of such a price cut. One such less optimistic scenario is that the competitors retaliate with similar price cuts, what is the minimum increase in sales of vanilla ice cream that makes the price cut a profitable decision? Scenario-c: Another less optimistic scenario is that competitors do not retaliate but the price cut in vanilla ice cream cannibalizes the company's own sales of other flavors, what is the maximum loss of sales in other flavors that makes the price cut in vanilla ice cream still profitable