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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 Mohaves two options follows:

	Rosa Umbrella			Decorated Umbrella
Estimated demand		21,000	units		21,000	units
Estimated sales price	$	23		$	33
Estimated manufacturing cost per unit
Direct materials	$	13.5		$	15.5
Direct labor		3.5			6
Variable manufacturing overhead		2.5			4.5
Fixed manufacturing overhead		4			4
Unit manufacturing cost	$	23.5		$	30
Additional development cost				$	10,000

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

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.
	Rosa Umbrella Decorated Umbrella Incremental Sales Revenue Variable Costs Contribution Margin Additional Development Costs Differential Profit

Mike purchases a heavy-duty truck (5-year class recovery property) for his delivery service on April 30, 2015. The truck is not considered a passenger automobile for purposes of the listed property and luxury automobile limitations. The truck has a depreciable basis of $39,080 and an estimated useful life of 5 years. Assume half-year convention for tax.

c. Calculate the amount of depreciation for 2015, including bonus depreciation but no election to expense, that Mike could deduct using the MACRS tables. $

d. Assume no income limit on the expense election. Calculate the amount of depreciation for 2015 including bonus depreciation and the election to expense that Mike could deduct under the following assumptions. Assume 2014 Section 179 limits are extended: $ Assume existing 2015 Section 179 limits remain in place: $

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