The Rosa model of Mohave Corporation is currently manufactured as a very plain umbrella with no...

 

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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 Mohave's two options follows: Estimated demand Estimated sales price Estimated manufacturing cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost Rosa Umbrella 14,000 units $ 12.00 $ 6.50 1.50 0.50 3.00 $11.50 Decorated Umbrella 14,000 units $ 23.00 $ 8.50 4.00 2.50 3.00 $ 18.00 $ 14,000 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 12,000 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 12,000 units. Should Mohave add decorations to the Rosa umbrella? 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 Mohave's two options follows: Estimated demand Estimated sales price Estimated manufacturing cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost Rosa Umbrella 14,000 units $ 12.00 $ 6.50 1.50 0.50 3.00 $11.50 Decorated Umbrella 14,000 units $ 23.00 $ 8.50 4.00 2.50 3.00 $ 18.00 $ 14,000 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 12,000 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 12,000 units. Should Mohave add decorations to the Rosa umbrella?

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1To determine the increase or decrease in profit we need to calculate the profit for each option Ros... View the full answer