Question

Pine Street Inc. makes unfinished bookcases that it sells for $59. Production costs are $37 variable and $10 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $75. Variable finishing costs are expected to be $8 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Pine 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:

See below

Explanation:

Option of whether Pine street Inc. should sell unfinished book cases

Sales per unit

$59

Less:

Variable cost per unit

$37

Contribution per unit

$22

Less:

Fixed cost

$10

Operating profit

$10.

Option of whether Pine street inc. should sell finished book cases

Sales per unit

$75

Less :

Variable cost per unit

$8

Contribution per unit

$67

Less :

Fixed cost

$10

Operating profit

$57

Therefore, it is recommended that Pine street inc. should sell finished book cases because that would yield the highest operating profit.