Question

Blossom Street Inc. makes unfinished bookcases that it sells for $57. Production costs are $37 variable and $10 fixed. Because it has unused capacity, Blossom Street is considering finishing the bookcases and selling them for $70. Variable finishing costs are expected to be $6 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Blossom 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 and Explanation:

The Preparation of an analysis on a per unit basis is shown below:-

Particulars Sell unfinished Sell finished Increase/Decrease

bookcases bookcases in income

Sale price per

unit $57 $70 $13

Less: variable cost

per unit $37 $43 $6

($37 + $6)

Les: fixed cost per

unit $10 $10 $0

Total cost per

unit $47 $53 $6

Net income per

unit $10 $17 $7

Therefore, Unfinished bookcases are further processed, as net profit per unit increases further by processing by $7