Problem:

Lark Art Company sells unfinished wooden decorations at a price of $15.00. The current profit margin is $5.00 per decoration. The company is considering taking individual orders and customizing them for sale. To finish the decoration the company would have to pay additional labor of $3.00, additional materials costing an average of $4.00 per unit and fixed costs would increase by $1,500.

Required:

If the company estimates that it can sell 600 units for $25 each month, would they make additional profits or losses?

• $300 profit
• $300 loss
• $800 profit
• $800 loss

Note: Explain all calculation and formulas.