Given the information below please answer the question bolded-, Should the company consider the changes why or why not? A comprehensive discussion is needed to fully answer this question. Please consider and discuss the following areas: fixed costs change, economies of scale, CM per unit change and sales fluctuation. In addition, give some real examples of additional cost increases for fixed costs and decreases for direct materials that could be implemented for this specific business. (at least 4 examples in total)

• The materials include $6,500 for the wood and other materials on a per job basis.
• It requires 45 hours of labor on average for the cabinetry. The hourly rate is $12.
• The sales price will be set at a markup of 65%.
• The company estimates that it will have 90,000 direct labor hours in total for the cabinets.
• It assumes 2000 units are sold on average per year.

A breakdown of estimated yearly costs for the 2000 units follows:

	Salaries- office & administrative				$ 650,000
	Salaries for factory supervisor, janitor and security				$ 400,000
	Office Rent				$ 350,000
	Factory Rent				$ 100,000
	Office utilities and Misc office expenses(based on units sold)				$ 45,000
	Sales travel(based on units sold)				$ 24,000
	Insurance - office				$ 60,000
	Depreciation - office equipment				$ 40,000
	Depreciation for factory equipment				$ 85,000
	Advertising				$ 220,000
	Sales commissions(based on units sold)				$ 450,000
	Factory Property taxes				$ 16,000
	Maintenance for factory equipment				$ 80,000

The changes-

The company is considering a new supplier and some additional factory costs to increase quality and production levels. The new supplier will reduce direct material costs by 5%. The fixed costs will increase costs by 48%. With the expected increase in quality, the company believes that it can support a 1% increase in sales price. The volume used should be 2000 units and maybe more volumes.

Should the company consider the changes why or why not? A comprehensive discussion is needed to fully answer this question. Please consider and discuss the following areas: fixed costs change, economies of scale, CM per unit change and sales fluctuation. In addition, give some real examples of additional cost increases for fixed costs and decreases for direct materials that could be implemented for the cabinet industry. (at least 4 examples in total)