Elmwood, Inc. currently sells 13,000 units of its product per year for $110 each. Variable costs total $85 per unit. Elmwoods manager believes that if a new machine is leased for $224,250 per year, modifications can be made to the product that will increase its retail value. These modifications will increase variable costs by $15.00 per unit, but Elmwood is hoping to sell the modified units for $140 each. a-1. Should Elmwood modify the units or sell them as is?

• Sell as is

• Sell with modifications

a-2. How much will the decision affect profit?