Profit Contribution Analysis. Ben Laden Rugs, Inc., sells hand-made cotton rugs to tourists at a price of $50. Of this amount, $40 is profit contribution. Ben Laden is considering an attempt to differentiate his product from several other competitors by using high quality natural herb dyes. Doing so would increase Ben Laden's unit cost by $15 per rug. Current annual profits are $35,000 on 1,000 rug sales.
A. Assuming average variable costs are constant at all output levels, what is Ben Laden's total cost function before the proposed change?
B. What will the total cost function be if high quality natural herb dyes are used?
C. Assume rug prices remain stable at $50. What percentage increase in sales would be necessary to maintain current profit levels?

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The Answer of Profit Contribution Analysis. Ben Laden Rugs, Inc., sells hand-made cotton rugs to tourists at a price of $50. Of this amount, $40 is profit contribution. Ben Laden is considering an attempt to differentiate his product from several other competitors by using high quality natural herb dyes. Doing so would increase Ben Laden's unit cost by $15 per rug. Current annual profits are $35,000 on 1,000 rug sales.
A. Assuming average variable costs are constant at all output levels, what is Ben Laden's total cost function before the proposed change?
B. What will the total cost function be if high quality natural herb dyes are used?
C. Assume rug prices remain stable at $50. What percentage increase in sales would be necessary to maintain current profit levels?