Vanessa Pareja has just become a product manager for Brand X as a toy manufacturer. Brand X is a product with a retail price of $1.00. Retail Margins on the product are $0.35 while wholesalers take a 12% margin. Brand X and its direct competitors sell a total of 20 million units annually. Brand X has 24% of this market. Variable manufacturing costs for Brand X are $0.09 per unit. Fixed manufacturing costs are $900,000. The advertising budget for Brand X is $500,000. The brand X product manager's salary and expenses total $35,000. Salespeople are paid entirely by a 10% commission (out of manufacturer price to wholesaler). Shipping costs, breakage, insurance, and so forth are $0.02 per unit.

Upon reflection, Ms. Pareja decides not to increase Brand X's advertising budget. Instead, she thinks she might give retailers an incentive to promote Brand X by raising their margins from $0.35 to $0.40. The margin increase would be accomplished by lowering the price of the product to retailers. Wholesaler margins would remain at 12%. Use this information to answer Question 3.

3a. If retailer margins are raised to $0.40 next year, how many units will Brand X have to sell to break even?

3b. How many units will Brand X have to sell to achieve the same profit next year as it did this year?

3c. What would Brand X's market share have to be for its profit impact to remain at this year's level?