Question
Could someone please help me with this question? The Rosa model of Mohave Corp. is currently manufactured as a very plain umbrella with no decoration.
Could someone please help me with this question?
The Rosa model of Mohave Corp. is currently manufactured as a very plain umbrella with no decoration. The company is considering changing this product to a much more decorative model by adding a silk-screened design and embellishments. A summary of the expected costs and revenues for Mohaves two options follows:
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1. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.
Rose Umbrella | Decorated Umbrella | Incremental | |
Sales Revenue | |||
Variable Costs | |||
Contribution Margin | |||
Additional Development Costs | |||
Differential Profit (loss) |
3-a. Suppose that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 15,000 units. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.
Rose Umbrella | Decorate Umbrella | Incremental Cost | |
Sales Revenue | |||
Variable Cost | |||
Contribution Margin | |||
Additional Developmental Costs | |||
Differential Profit (Loss) |
3-b. Should Mohave add decorations to the Rosa umbrella?
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