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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 Decorated Umbrella Rosa Umbrella Estimated demand Estimated sales price Estimated manufacturing cost per unit 12,000 units 12,000 units $ 10.00 21.00 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $ 4.50 1.50 0.50 2.00 $ 6.50 4.00 2.50 2.00 15.00 $12,000 Unit manufacturing cost Additional development cost Required 1. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations Rosa Umbrella Decorated Umbrella Incremental Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 2. Should Mohave add decorations to the Rosa umbrella? es No 3-a. Suppose that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 10,000 units. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations. Rosa Umbrella Decorated UmbrellaIncremental Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit (Loss) 3-b. Should Mohave add decorations to the Rosa umbrella? O Yes O No References eBook & Resources

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