Question: They sell pencils for $14 per unit. The variable cost are $6 per unit and 15.000 units are sold annually and a profit of $35.000

They sell pencils for $14 per unit. The variable cost are $6 per unit and 15.000 units are sold annually and a profit of $35.000 is realized per year. A new design will increase the variable costs by 25% and fixed costs by 15% but sales will increase to 22.000 units per year.

1. If the selling price is to be kept the same, what will be the annual profit?

2. At what selling price do we break even?

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