Question 6 (15 marks) ABC industries manufactures a testing equipment (TC-1). It also installs the equipment at customers' sites. Additional information on the Manufacturing and Installation Departments is as follows. Manufacturing Installation Department Department Annual capacity 400 units 300 units Equipment manufactured and installed 300 units 300 units ABC manufactures only 300 (TC-1) units per year because the Installation Department has only enough capacity to install 300 units. The equipment sells for $40,000 per (TC-1) unit installed and has direct material costs of $15,000 per (TC-1) unit installed. All costs other than direct material costs are fixed. The following requirements are independent of each other. Required: 1. ABC engineers have found a way to reduce equipment manufacturing time. The new method would cost an additional $100 per unit and would allow ABC to manufacture 50 (TC-1) additional units. Should ABC implement the new method? Show your calculations. (2marks) 2. ABC engineers have proposed a change in direct materials that would increase direct materials costs by $2,000 per (TC-1) unit. This change would enable ABC to install 320 (TC-1) units each year. If ABC makes the change, the new design will have to be implemented on all (TC-1) units sold. Should ABC use the new design? Show your calculations. (4 marks) 3. A new installation technique has been developed by ABC engineers that will enable ABC to produce and install 20 units of a new testing equipment (NTE-5) a year. The new (NTE-5) unit will sell for $95,000 and have direct materials costs of $35,000 per (NTE-S) unit installed. However, as result of the new installation technique, only 250 (TC-1) units could be installed. In addition, the new method will increase installation costs by $50,000 each year. Should ABC implement the new technique? Show your calculations. (6 marks)