He rosa model of mohave corp. 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: rosa umbrella decorated umbrella estimated demand 15,000 units 15,000 units estimated sales price $ 13.00 $ 24.00 estimated manufacturing cost per unit direct materials $ 7.50 $ 9.50 direct labor 2.50 5.00 variable manufacturing overhead 1.50 3.50 fixed manufacturing overhead 3.00 3.00 unit manufacturing cost $ 14.50 $ 21.00 additional development cost $ 15,000 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 that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 13,000 units. determine the increase or decrease in profit if mohave sells the rosa umbrella with the additional decorations.
3-b. should mohave add decorations to the rosa umbrella?