Question

Waterway Industries is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Waterway Industries would sell it for $100. The cost to assemble the product is estimated at $20 per unit and the company believes the market would support a price of $120 on the assembled unit.

What is the incremental profit per unit from selling the product assembled?
a. $20
b. $30
c. $40
d. $50

Answer 1

The incremental profit per unit for selling the product assembled compared to unassembled is $0, as both assembled and unassembled versions yield the same profit per unit of $40.

Step-by-step explanation:

The incremental profit from selling the product assembled is calculated by comparing the profits from selling the product unassembled to the profits from selling it assembled.

• Unassembled unit profit = Selling price - Unit cost = $100 - $60 = $40 per unit
• Assembled unit profit = Selling price (assembled) - Unit cost (unassembled) - Assembly cost = $120 - $60 - $20 = $40 per unit

We can see that the profit per unit remains the same, whether the product is sold assembled or unassembled. Therefore, the incremental profit per unit from selling the product assembled is $0, which is not one of the options provided. It appears there might be a mistake in the options or the question's assumptions.