Question
ABC Product Company produces Basic with variable manufacturing costs of $21 per unit. The selling price of Basic is $25 per unit. The fixed manufacturing
ABC Product Company produces Basic with variable manufacturing costs of $21 per unit. The selling price of Basic is $25 per unit. The fixed manufacturing overhead cost is $75,000. A normal production run includes 150,000 units. ABC Products Company has discovered an additional process to change Basic into Improved. Additional costs are estimated at $5 per unit. Improved would sell for $29. Additional fixed manufacturing overhead costs of $14,500 would be incurred if Improved is produced. There would no change in the number of units produced.
Make an analysis to determine if ABC Produce Company should continue producing and selling Basic or change Basic into Improved. (Show your analysis)
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