The Porter Wagon Company produces sleds, scooters, and wagons. Scooters are not as popular as they used to be, and the company is considering dropping this product.

Porter currently sells 5,000 scooters per year for $25 each. Variable manufacturing and selling costs total $17 per scooter. Fixed costs of $45,000 can be avoided if scooters are not produced.

Required: Prepare an analysis to answer each of the following independent questions.

(1) Given this information, by how much would Porter’s profit increase if production of scooters is discontinued?
(2) If Porter can increase the sales volume of scooters to 6,000 units per year by spending an additional $10,000 per year on advertising, should Porter continue scooter production?
(3) If Porter can increase the sales volume of scooters to 7,000 per year by reducing its selling price to $20 per scooter, should Porter continue scooter production? TYK-1