Question

Walton Inc., makes an unassembled product that it currently sells for $55. Production costs are $20. Walton isconsidering assembling the product and selling it for $68. The cost to assemble the product is estimated at $12.What decision should Walton make?

a. process further because NI will be $13 greater
b. sell before assembly because NI per unit will be $12 greater
c. process further because NI will be $1 greater
d. sell before assembly because NI per unit will be $1 greater

Answer 1

c. process further because NI will be $1 greater

Step-by-step explanation:

Calculation to know What decision that Walton should make

First step is to calculate the current selling price profit

Using this formula

Current selling price profit= selling price -cost price

Let plug in the formula

Current selling price profit= =$55-$20

Current selling price profit = $35

Second Step is to calculate the new selling price profit

New selling price profit= $68-($20+_12)

New selling price profit=$68-$32

New selling price profit= $36

Last step is to calculate the NI using this formula

NI=New selling price profit-Current selling price profit

Let plug in the formula

NI=$36-$35

NI=$1

Based on the above calculation their is an increase in net income of the amount of $1 which means that the decision that Walton should make will be to process further because NI will be $1 greater