Thomass Magnate produces backpacks in its fully automated facility. Its lightweight nylon backpack used to be a sought-after product among university students. The company barely broke even last year after combating declining sales. Last year, the company produced and sold 50,000 unit, and variable marketing coste were RMS per unit sold. For the current year, as optimistic as they could be, the company developed its business plan with the assumption it would gain an annual profit of RM550,000 with the established price and costs. "Only 10,000 backpacks sold in the first quarter? We necd to think of a new sfratejo, a wen good" onel" said the president after reviewing the first quarter financial staternents. It was clear that the current year's target profit would not be reached unless some actions were taken. A management committee has been assigned to analy se the situation and develop several options. The following mutually exclusive options were presented to the president: - Option 1: Reduce the sales price to RM75. The sales department forecasts that with the significantly reduced sales price, 55,000 backpacks can be sold during the remainder of the year. Total fixed and variable unit costs will stay as budgeted. - Option 2: Lower variable costs per unit by RM8 through the use of less expensive raw materials and slightly modified manufacturing techniques. The sales price would also be reduced by RM10, and sales of 51,000 backpacks for the remainder of the year are forecast. - Option 3: Cut fixed costs by RM280,000 and lower the sales price by 5 per cent. Variable costs per unit will be unchanged. Sales of 49,000 backpacks are expected for the remainder of the year. Required: 1. If no changes are made to the selling price or cost structure, determine the number of backpacks that the company must sell: a. to break even. b. to achieve its target annual profit. 2. Briefly discuss the company's cost structure. How is this concept related to the failure of Thomass Magnate to meet its target annual profit with the established price and costs? 3. Determine which option should be selected to achieve the company's annual target profit. (4 marks) Explain your answer. (Note: Show all your workings)