The Rosa model of Mohave Corporation 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:

	Rose Umbrella	Decorated Umbrella
Estimated demand	27,000 units	27,000 units
Estimated sales price	$29.00	$39.00
Estimated manufacturing cost per unit
Direct materials	$19.50	$21.50
Direct labor	4.50	7.00
Variable manufacturing overhead	3.50	5.50
Fixed manufacturing overhead	6.00	6.00
United manufacturing cost	$33.50	$40.00
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 the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 25,000 units. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

3-b.Suppose the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 25,000 units. Should Mohave add decorations to the Rosa umbrella?