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

a)Compute the breakeven point in units sold. (5 marks)

b)Suppose the unit purchased is $5 instead of $6, the fixed cost increases to $500,but the selling price is unchanged. Compute the new breakeven point in units sold. (5 Marks)

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

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