question 1

Ellis sells one product with the following information:

• Selling Price per unit (SP) $20
• Variable Cost per unit (VC) $15
• Fixed Costs = $10,000
• Current Level of Sales 7,000 units

The production manager has suggested the following idea: Increase the quality of RM (increasing VC to $18). Customers will be willing to pay $22.50 for this improved product and sales will increase to 12,000 units. If management implements this suggestion and all goes as planned, net income will increase by $__________.

question 2

The total maintenance cost for Double Boe's Bakery consists of both fixed and variable costs. Double Boe has the following data from the last four months:

	Machine Hours	Total Maintenance Cost
January	5,000	$25,000
February	1,600	$14,800
March	1,700	$14,640
April	3,200	$20,000

If Double Boe expects to use 4,000 machine hours next month he would expect his total maintenance costs to be $___________.