Question
25 . (8 points) Steve, Inc. currently sells 20,000 Slipslimslamafetters per year for $200 each. Variable costs total $75 per unit. Steves manager believes that
25 . (8 points) Steve, Inc. currently sells 20,000 Slipslimslamafetters per year for $200 each. Variable costs total $75 per unit. Steves manager believes that if a new machine is leased for $250,000 per year, modifications can be made to the product that will increase its retail value. These modifications will increase variable costs by $50 per unit, but Steve is hoping to sell the modified units for $275 each. a. Should Steve modify the units or sell them as is? b. How much will the decision affect profit? c. What is the least Steve could charge for the modified units to make it worthwhile to modify them?
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