The Rosa model of Mohave Corp. is currently manufactured as a very plain umbrella with...
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The Rosa model of Mohave Corp. is currently manufactured as a very plain umbrella with no decoration. The company is considering changing this product to a much more decorative model by adding a silk-screened design and embellishments. A summary of the expected costs and revenues for Mohave's two options follows: Rosa Decorated Umbrella Umbrella Estimated demand Estimated sales price Estimated manufacturing cost per unit 10.000 units 10,000 units $8.00 19.00 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $2.50 1.50 0.50 2.00 $6.50 $5.50 4.00 2.50 2.00 $14.00 $10,000 Unit manufacturing cost Additional development cost Required 1. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations. Rosa Umbrella Decorat Incremental Umbrella Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss)
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