Northampton plc, a British-based company, makes superbikes for the U.S. and British markets. For the current year, it estimates fixed costs of £10 million. Its variable costs are £3,000 per motorcycle, and it expects to both produce and sell 25,000 units this year, about 15,000 units in the United States at $6,300 each, and 10,000 units in the United Kingdom at £3,500 each. The current exchange rate is £1 = $1.80.

Required

1. Compute the contribution margin per unit and the breakeven sales volume.
2. How much operating income (in £) is budgeted for the year?
3. If the company decides to sell only in the United Kingdom, fixed costs would fall by 30%. Variable costs  would remain the same. The company feels it could still sell 25,000 units per year overall, but it would  have to reduce the price to stimulate the quantity demanded in the United Kingdom. By what percentage  can it reduce the price and still make the target operating income from requirement 2?
4. The company management is confident that they can generate an operating income of £5 million if the selling price remains at £3,500 and variable costs remain unchanged. Calculate the number of superbikes that need to be sold to achieve this target. Assume a net income tax rate of 25%.