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Information on Guadalupe Ltd . ' s three products follows: A , B , & C Unit sales per month. . . . . 1

Information on Guadalupe Ltd.'s three products follows:
A, B, & C
Unit sales per month. ....1,5001,2002,000
Selling price per unit. $20.00 $14.00 $30.00
Variable costs per unit. (22.00)(10.00)(18.00)
Unit contribution margin. $ (2.00) $4.00 $12.00
Determine the effect each of the following situations would have on monthly profits. Each situation below should be evaluated independently of all others.
a. Product A is discontinued.
b. Product A is discontinued, and the subsequent loss of customers causes sales of Product B to decline by 150 units. Hint: The answer is an increase in monthly profits by $2,400. Please show how this answer is calculated.
c. The selling price of A is increased to $25 with a sales decrease of 250 units.
d. The price of Product B is increased to $20 with a resulting sales decrease of 300 units. However, some of these customers shift to Product A; sales of Product A increased by 200 units. Hint: The answer is an increase in monthly profits of $3,800. Please show how this answer is calculated.
e. Product A is discontinued, and the plant in which A was produced is used to produce D, a new prod- uct. Product D has a unit contribution margin of $2. Monthly sales of Product D are predicted to be 1,500 units.
f. The selling price of Product C is increased to $35, and the selling price of Product B is decreased to $10. Sales of C decline by 350 units, while sales of B increase by 400 units. Hint: The answer is a decrease in monthly profits of $750. Please show how this answer is calculated.

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