Requirement $2.$

BaileyBailey$\text{'}$s

current manufacturing process is labor intensive. Kate

HoffmannHoffmann$,$

BaileyBailey$\text{'}$s

production$$ manager, has proposed investing in$$ state$-$of$-$the$-$art manufacturing$$ equipment, which will increase the annual fixed costs to

$ $4$ comma $500$ comma $000$$$4,500,000.$

The variable costs are expected to decrease to

$ $44$$$44$

per unit.

BaileyBailey

expects to maintain the same sales volume and selling price next year. How would acceptance of

HoffmannHoffmann$\text{'}$s

proposal affect your answers to$($a$)$ and$($b$)$ in requirement$1?$

Recalculate$($a$)$ and$($b$)$ if the proposal is accepted.

$($a$)$

The contribution margin would be

$$

under Hoffmann's proposal.