Patsy Smith is planning to sell her special knife for $15 per unit. She purchases units from a local distributor for $6 each. She can return any unsold units for a full refund. Fixed costs for booth rental, including lighting and security is $4500.

Required

The breakeven point is 500 units although units purchases decreased from $6 to $5 each, and the fixed cost increased by $500. Note: Selling price remains unchanged.

Using the above data, explain how cost behaviour affects Patsy Smiths decision- making? (10 marks)