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 Mohaves two options follows:

	Rosa Umbrella			Decorated Umbrella
Estimated demand		22,000	units		22,000	units
Estimated sales price	$	24.00		$	34.00
Estimated manufacturing cost per unit
Direct materials	$	14.50		$	16.50
Direct labor		3.50			6.00
Variable manufacturing overhead		2.50			4.50
Fixed manufacturing overhead		5.00			5.00
Unit manufacturing cost	$	25.50		$	32.00
Additional development cost				$	10,000

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 20,000 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?

I just need 3A

Suppose that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 20,000 units. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

	Rosa Umbrella	Decorated Umbrella	Incremental
Sales Revenue	$480,000selected answer incorrect	$680,000selected answer correct	$200,000selected answer incorrect
Variable Costs	410,000selected answer incorrect	540,000selected answer correct	(130,000)selected answer incorrect
Contribution Margin	$70,000selected answer incorrect	$140,000selected answer correct	$70,000selected answer incorrect
Additional Development Costs	0selected answer correct	10,000selected answer correct	(10,000)selected answer correct
Differential Profit (Loss)	$70,000selected answer incorrect	$130,000selected answer correct	$60,000selected answer incorrect