Killweed sells weed killers. It is currently considering importing a weed killer for bindii (Soliva sessilis), a weed commonly found in grass, which produces painful prickly seeds, to replace its existing Australian made brand. The cost per litre of this imported weed killer is $1 compared with $2.50 for the commonly used weed killer for bindii manufactured in Australia. The selling price for the Australian made brand is $15 per litre. Import costs are $0.20 per litre for the new brand. Killweed currently sells 80 000 litres of bindii poison per year. Killweed estimates that it needs to spend $10 000 per annum advertising the new brand to achieve these sales levels and would have to sell the new spray for $1 less per litre.

Required:

a Calculate the contribution margin per unit for both bindii weed killers.

b From a financial point of view, should Killweed replace their existing brand of weed killer with the new imported brand? Show calculations.

c Are there any non-economic considerations that you can think of?

d What course of action do you recommend, and why?