Kaizer Plastics produces a variety of plastic items for packaging and distribution. One item, container #145, has had a low contribution to profits. Last year, 20,000 units of container #145 were produced and sold. The selling price of the container was $20 per unit, with a variable cost of $18 per unit and a fixed cost of $70,000 per year.

(a) What is the break-even quantity for this product? Use both graphic and algebraic methods to get your answer.

(b) The company is currently considering ways to improve profitability by either stimulating sales volumes or reducing variable costs. Management believes that sales can be increased by 35 percent of their current level or that variable cost can be reduced to 90 percent of their current level. Assuming all other costs equal, identify which alternative would lead to a higher profit contribution.