The Rosa model of Mohave Corp. is currently manufactured as a very plain umbrella with no decoration. The company is considering changing this product to a much more decorative model by adding a silk$-$screened design and embellishments. A summary of the expected costs and revenues for Mohave$$s two options follows:

Rosa Umbrella Decorated Umbrella

Estimated demand $28,000$ units $28,000$ units

Estimated sales price $ $30\mathrm{.}00$ $ $40\mathrm{.}00$

Estimated manufacturing cost per unit

Direct materials $ $20\mathrm{.}50$ $ $22\mathrm{.}50$

Direct labor $4\mathrm{.}507\mathrm{.}00$

Variable manufacturing overhead $3\mathrm{.}505\mathrm{.}50$

Fixed manufacturing overhead $6\mathrm{.}006\mathrm{.}00$

Unit manufacturing cost $ $34\mathrm{.}50$ $ $41\mathrm{.}00$

Additional development cost $ $12,000$

Required:

$1.$ Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

$2.$ Should Mohave add decorations to the Rosa umbrella?

$3-$a$.$ Suppose that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to $26,000$ units. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

$3-$b$.$ Should Mohave add decorations to the Rosa umbrella?Required:

Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

Should Mohave add decorations to the Rosa umbrella?

$3-$a$.$ Suppose that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to $26,000$ units.

Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

$3-$b$.$ Should Mohave add decorations to the Rosa umbrella?

Complete this question by entering your answers in the tabs below.

Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.