For the last 2 years, The Health Company has experienced a fixed cost of $850,000 per year and an (r – v) value of $1.25 per unit for its multivitamin line of products. International competition has become severe enough that some financial changes must be made to keep market share at the current level.

(a) Perform a spreadsheet-based graphical analysis to estimate the effect on the breakeven point if the difference between revenue and variable cost per unit increases somewhere between 1% and 15% of its current value.

(b) If fixed costs and revenue per unit remain at their current values, what type of change must take place to make the breakeven point go down?