Mortech determines that it could add another a second feature. If they process the camera with the second feature, it will require an additional $20 per unit of variable costs on top of the $45 for a total of $65, plus an increase in fixed costs of $500 per month with the addition $1,000 for a total of $1,500. The current price of the camera is $200. Even with this new feature, the cost per unit will be below other competitors in the market. At what price level would the upgraded camera with the two features begin to improve operational earnings?

Problem 2 Mortech determines that it could add another a second feature. If they process the camera with the second feature, it will require an additional $20 per unit of variable costs on top of the $45 for a total of $65, plus an increase in fixed costs of $500 per month with the addition $1,000 for a total of $1,500. The current price of the camera is $200. Even with this new feature, the cost per unit will be below other competitor's in the market. At what price level would the upgraded camera with the two features begin to improve operational earnings? USING THE EXAMPLE ABOVE, NOW YOU FILL IN THE POTENTIAL COSTS. CURRENT COSTS Variable Costs Fixed Costs TOTAL COSTS $ $ $ 80 1,500 1,580 POTENTIAL COSTS Variable Costs Fixed Costs TOTAL COSTS $ $ $ 200 CAMERAS SOLD EACH MO. Variable Costs ONLY $ TOTAL COSTS $ 200 16,000 316,000 CAMERAS SOLD EACH MO. Variable Costs ONLY $ TOTAL COSTS $ $ $ $ 200 Differential Variable Costs Add: Increase in Fixed Costs Total differential cost Differential Cost Per Unit ($14,500 / 100) Add: Current Selling Price Price to be charged PROJECTED NEW INCOME # of Units Per Month $ New Price $ TOTAL INCOME $ 145 $ $ 200 CURRENT INCOME $ # of Units Per Month Current Price TOTAL INCOME $ 200 200 40,000