ABC industries manufactures a testing equipment (TC-1). ABC also installs the equipment at customers sites. Additional information on the Manufacturing and Installation Departments is as follows.

				Equipment			Equipment
				Manufactured			Installed
Annual Capacity				400 units per year			300 units per year
Equipment manufactured				300 units per year			300 units per year
and installed

ABC manufactures only 300 (TC-1) units per year because the Installation Department has only enough capacity to install 300 units. The equipment sells for $40,000 per (TC-1) unit installed and has direct material costs of $15,000 per (TC-1) unit installed. All costs other than direct material costs are fixed.

Required:

1. ABC engineers have found a way to reduce equipment manufacturing time. The new method would cost an additional $100 per unit and would allow ABC to manufacture 50 (TC-1) additional units. Should ABC implement the new method? Show your calculations.

2. ABC engineers have proposed a change in direct materials that would increase direct materials costs by $2,000 per (TC-1) unit. This change would enable ABC to install 320 (TC-1) units each year. If ABC makes the change, it will implement the new design on all (TC-1) units sold. Should ABC use the new design? Show your calculations.