Washington Industries manufac- tures electronic testing equipment. Washington also installs the equipment at customers' sites and en- sures that it functions smoothly. Additional information on the...

Washington’s designers have proposed a change in direct materials that would increase direct material costs by $2,000 per unit. This change would enable Washington to install 285 units of equipment each year. If Washington makes the change, it will implement the new design on all equipment sold. Should Washington use the new design? Show your calculations.

Extracted text: Washington Industries manufac- tures electronic testing equipment. Washington also installs the equipment at customers' sites and en- sures that it functions smoothly. Additional information on the manufacturing and installation departments is as follows (capacities are expressed in terms of the number of units of electronic testing equipment): Annual capacity Equipment manufactured and installed Equipment Manufactured 285 units per year 250 units per year Equipment Installed 250 units per year 250 units per year Washington manufactures only 250 units per year because the installation department has only enough capacity to install 250 units. The equipment sells for $55,000 per unit (installed) and has direct material costs of $30,000. All costs other than direct material costs are fixed. The following requirements refer only to the preceding data. There is no connection between the requirements.