The sales manager of Trishas Global Marketing (TGM) is considering expanding sales by taking their Original Widget and modifying it for export into the European and Asian markets. Relatively minor cosmetic changes will be made to enhance the product's appeal to local tastes. After reviewing the sales forecasts, the sales department feels that 65% of units sold will be the Original product, 25% will be new Euro model and the remainder will be the new Pacific model.

The following information has been assembled by the sales and production departments:

Original Euro Pacific

Contribution margin $20.00 $32.00 $10.00

Per unit

The common fixed costs associated with the manufacture of these three products are $2,500,000 per year and TGM has a marginal tax rate of 20%. Suppose the target sales mix is achieved and 150,000 total units are sold. Calculate the estimated total profit before taxes if a manufacturing process improvement is implemented. Management believes the process improvement will increase annual fixed costs by $186,000 but is also estimated to reduce the direct labor cost of each unit produced by $1.75. No other assumptions are changed. Round to the nearest $1.00.