Question

Sunland Street Inc. makes unfinished bookcases that it sells for $58. Production costs are $37 variable and $11 fixed. Because it has unused capacity, Sunland Street is considering finishing the bookcases and selling them for $75. Variable finishing costs are expected to be $6 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Sunland Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Answer and Explanation:

The computation is shown below:

Particulars Sell                  Process      Net income

                      Unfinished Further     Increase (Decrease)

Sales Price

per unit            $58                 $75               $17

Variable cost

per unit             $37                  $43               -$6

                                         ($37+ $6)

CPU Fixed        $11                    $11                  $0

CPU Total  $48                    $54              -$6

Net Income

Per Unit          $10                    $21                $11

As it can be seen that there is an increase in net income per unit so The Sunland street should sell its finished bookcases