Question

Pine Street Inc. makes unfinished bookcases that it sells for $58.09. Production costs are $37.97 variable and $10.12 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $73.08. Variable finishing costs are expected to be $6.64 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.

Answer 1

Pine Street should sell finished bookcases.

Step-by-step explanation:

Differential analysis

Sell unfinished Process further Net income

Increase (decrease)

Sale price per unit 58.09 73.08 14.99

Cost per unit

Variable 37.97 44.61 -6.64

Fixed 10.12 10.12 0

Total 48.09 54.73 8.35

Net income per unit 10 18.35 8.35

So, the book cases should be sold after processed further.