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Pine Street Inc. makes unfinished bookcases that it sells for $57.00. Production costs are $37.20 variable and $9.50 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $70.00. Variable finishing costs are expected to be $5.50 per unit with no increase in fixed costs.
Required:
Prepare an analysis on a per unit basis showing whether Pine Street should sell unfinished or finished bookcases.

Respuesta :

Answer:

Pine Street Inc. should sell finished bookcases as it increases net income by $7.50.

Explanation:

According to the scenario, the computation of the given data are as follows:

                                 Sell Unfurnished        Sell finished       Net Income                                    

Sales per unit                  $57.00                   $70.00            $13.00

Cost per unit    

Variable                                   $37.20                    $42.70           -$5.50

Fixed                                   $9.50                    $9.50              0

Total                                   $46.70                    $52.20           -$5.50

Net income per unit           $10.30                    $17.80           $7.50

Net income increases for sell finished goods by $7.50.

So, Pine Street Inc. should sell finished bookcases.

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