Question

"Pine Street Inc. makes unfinished bookcases that it sells for $57.10. Production costs are $37.94 variable and $10.50 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $72.02. Variable finishing costs are expected to be $7.14 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. (Round answers to 2 decimal places, e.g. 15.25. 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 Preparation of analysis on a per unit basis showing whether Pine Street should sell unfinished or finished bookcases is prepared below:-

Particulars Sell unfinished Process further Net income

(loss)

Sales per unit $57.10 $72.02 $14.92

Cost per unit

Variable $37.94 $45.08 -$7.14

($37.94 + 7.14)

Fixed $10.5 $10.5

Total $48.4 $55.58 $7.78

Net income per

unit $8.66 $16.44 $7.78

From the above calculation The bookcases to be sold and process further.