A subsidiary of a major furniture company manufactures wooden pallets. The plant has the capacity to produce 300,000 pallets per year. Presently, the plant is operating at 70 percent of capacity. The pallets’ selling price is \($18.25\) per pallet, and the variable cost per pallet is \($15.75\). At zero output, the subsidiary plant’s annual fixed costs are \($550\),000. This amount remains constant for any production rate between zero and plant capacity.

a. With the present 70 percent of capacity production, what is the expected annual profit or loss for the subsidiary plant?

b. What annual volume of sales (units) is required in order for the plant to break even?

c. What would be the annual profit or loss if the plant is operating at 90 percent of capacity?

d. If fixed costs could be reduced by 40 percent, what would be the new breakeven sales volume?