Question

An unfinished desk is produced for $36.45 and sold for $64.35. A finished desk can be sold for $76.00. The additional processing cost to complete the finished desk is $6.45. Provide a differential analysis for further processing. Round your answers to two decimal places, if necessary. Differential revenue from further processing: Revenue per unfinished desk $ 64.35 Revenue per finished desk 76.00 Differential revenue $ -11.65 Differential cost per desk: Additional cost for producing -6.45 Differential income from further processing

Answer 1

It is more profitable to continue processing by $5.2 per desk.

Step-by-step explanation:

Giving the following information:

An unfinished desk is produced for $36.45 and sold for $64.35.

A finished desk can be sold for $76.00.

The additional processing cost to complete the finished desk is $6.45.

We need to determine the effect on the income for further processing the desk.

Contribution margin per unfinished desk= 64.35 - 36.45= $27.9

Contribution margin per finished desk= 76 - 36.45 - 6.45= $33.1

It is more profitable to continue processing.