A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable costs = $10 per unit.

a. What is the profit (or loss) of the current system?

b. If a price of $80 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect?

c. Do you anticipate that the manager will want to change the process?