nit selling price will increase by S% fte inl/hour rates will increase by 20%. serva- ming ent is currently considering the replacement of the company's old machine with a new one that would la mailion. The new machine is expected to last five years and to have a salvage value of $75.000. By using the new management expects to cut variable direct labour to three hours per unit, and sales are expected to increase to i a that level. but the ompny woll to er year geme alers tine whether or not the company should purchase the new machine. Increase in prokn. S11.510,000 (adapted from CMA Canada, now CPA Canada) T&G Co. manufactures three types of computer desks. The income statement for the three products and the 1S0 6,) company is shown below: Calculate contri margin and pre Product A $75,000 10,000 28,000 68.000 $7,000 Product B 595,000 Total inctem s105,000 $275,000 Variable costs Fixed costs Total costs Operating income 90,000 20,000 110,000 190,000 product and s 258,000 $15,000-5,000) 000 The company produces 1,000 units of each product. The company's capacity is 17,000 machine hours. The machine each product are seven hours for Product A, five hours for Product B, and five hours for Product C. Fixed costs m allocated based on machine hours. Answer the following questions: the current production levels are maintained, should the company eliminate Product C? Explain your reasoning ) If the company can sell unlimited quantities of any of the three products, which product should be produced? lSuppose the company can sell unlimited quantities of any of the three products. If a customer wanted to purchase (e) s12 500 units of Product C, what would the minimum sale price per unit be for this order? 4) The company has a contract that requires it to supply 500 units of each product to a customer. The total market (d) pn demand for a single product is limited to 1,500 units. How many units of each product should the company manufac- ture to maximize its total contribution margin including the contract? (adapted from CGA-Canada, now CPA Canada)