Please show all steps and only complete if you are 100% certain on your response

Question

Please show all steps and only complete if you are 100% certain on your response. Thank you!

Elmwood, Inc. currently sells 12,000 units of its product per year for S100 each. Variable costs total S75 per unit. Elmwood's manager believes that if a new machine is leased for S 147,000 per year, modifications can be made to the product that will increase its retail value. These modifications will increase variable costs by S20 per unit, but Elmwood is hoping to sell the modified units for S130 each. a. Should Elmwood modify the units or sell them as is? How much will the decision affect profit?

Explanation / Answer

Profit if sells as it is As it is Modification Units Selling Price 100 130 Variable Cost 75 95 Contribution 25 35 Total 300000 420000 Increase 120000 Loss = 147000-120000 = $ 27000 Elmwood should sell the units as it is

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