Leisure Supplies is considering the possibility of using a new process for producing sinks. This new process would increase the fixed cost by $16,000.
In other words, the fixed cost would double (Problem). This new process will improve the quality of the sinks and reduce the cost it takes to produce each sink. It will cost only $19 to produce the sinks using the new process.
(a) What do you recommend?
(b) Leisure Supplies is considering the possibility of increasing the purchase price to $32 using the old process given in Problem. It is expected that this will lower the mean sales to 26,000 units. Should Leisure Supplies increase the selling price?