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The 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:

$\backslash$table$[[,\backslash$table$[[$Rosa$],[$Umbrella$]],\backslash$table$[[$Decorated$],[$Umbrella$]],],[$Estimated demand,$21,000$ units,$21,000,$units$],[$Estimated sales price,$$23\mathrm{.}00,$$$33\mathrm{.}00,],[$Estimated manufacturing cost per unit,,,$],[$Direct materials,$$13\mathrm{.}50,$$$15\mathrm{.}50,],[$Direct labor,$\backslash$table$[[1\mathrm{.}50],[3\mathrm{.}50]],\backslash$table$[[8\mathrm{.}00],[6\mathrm{.}00]],],[$Variable manufacturing overhead,$2\mathrm{.}50,4\mathrm{.}50,],[$Fixed manufacturing overhead,$4\mathrm{.}00,4\mathrm{.}00,],[$Unit manufacturing cost,$$23\mathrm{.}50,$$$30\mathrm{.}00,],[$Additional development cost,,$$10,000,]]$

Required:

Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

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 $19,000$ 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?

Req $1$

Req $2$

Req $3A$

Req $3$B

Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

$\backslash$table$[[,\backslash$table$[[$Rosa$],[$Umbrella$]],\backslash$table$[[$Decorated$],[$Umbrella$]],$Incremental$],[$Sales Revenue,,,$],[$Variable Costs,,,$],[$Contribution Margin,,,$],[$Additional Development Costs,,,$],[$Differential Profit $($Loss$),,,]]$

Suppose that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to $19,000$ units. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

$\backslash$table$[[,\backslash$table$[[$Rosa$],[$Umbrella$]],\backslash$table$[[$Decorated$],[$Umbrelia$]],$Incremental$],[$Sales Revenue,,,$],[$Variable Costs,,,$],[$Contribution Margin,,,$],[$Additional Development Costs,,,$],[$Differential Profit $($Loss$),,,]]$

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