P17-33 Applications of Differential Analysis Moscot manufactures high-end sunglasses that it sells in retail shops and online for $310, on average. Assume the following represent manufacturing and other costs. Variable Costs per Unit Fixed Costs per Month Direct materials. . .. . $ 80 Factory overhead . . . . . . . $450,000 Direct labor . . . .. 50 Selling and administrative. . 375,000 Factory overhead . 35 Total . . . . . . $825,000 Distribution . . . . . 10 Total . . . $175 The variable distribution costs are for transportation to retail partners. Assume the current monthly production and sales volume is 15,000 units. Monthly capacity is 20,000 units. Required Determine the effect of each of the following independent situations on monthly profits. a. A $50 increase in the unit selling price should result in a 2,000-unit decrease in monthly sales. b. A 10% decrease in the unit selling price should result in a 6,000-unit increase in monthly sales. However, because of capacity constraints, the last 1,000 units would be produced during overtime with the direct labor costs increasing by 50%. c. A British distributor has proposed to place a special, one-time order for 1,000 units at a reduced price of $250 per unit. The distributor would pay all transportation costs. There would be additional fixed selling and administrative costs of $750.d. A Swiss distributor has proposed to place a special, one-time order for 6,000 units at a special price of $250 per unit. The distributor would pay all transportation costs. There would be additional fixed selling and administrative costs of $1,000. Assume overtime production is not possible. e. Assume Moscat provides a designer case for each pair of sunglasses that it manufactures. A Chinese manufacturer has offered a one-year contract to supply the cases at a cost of $10 per unit. If Moscat accepts the offer, it will be able to reduce variable manufacturing costs by 5%, reduce fixed costs by $5,000, and rent out some freed-up space for $4,000 per month. f. The glasses also come with a choice of lens tint. Assume that eliminating that option would reduce variable costs by $5 and eliminate $50,000 in fixed factory overhead. The selling price would likely have to decrease to $290 per unit