The management of Kayla Industries has been aggressive in trying to build market share. The price was set at $5 per unit, well below the existing market price. Variable costs were $4.50 per unit, and annual fixed costs in the first year were $600 000
Required:
a. If Kayla Industries were to sell 1 million units in the first year, what profit (loss) would be achieved?
b. If sales were to remain at 1 million in the second year, and the fixed and variable costs remained the same, what price would need to be set to achieve a profit of $25 000?