Mesa Verde manufactures unpain
Mesa Verde manufactures unpainted furniture for the the do-ityourself (DIY) . It currently sells a table for $66, productioncosts per unit are $45 variable and $11 fixed.
Mesa is considering staining and sealing the table to sell itfor $104. Variable costs per unit to finish each table are expectedto be an additional $20 per unit, and fixed
costs are expected to be an additional $2 per unit.
Prepare an analysis showing whether Mesa Verde should sellunpainted or finished tables.
(SELL ) (Process further ) ( Net Income ( increase/decrease)
Sell price per unit $_____ $_______ $________________________
Cost per unit Variable $ _________ $ ______________$________________________-
Fixed _____________ ___________ $__________________
Total $ ____________ $ ___________ $________________________
Net Income per uni t $_______________ $_______________$_____________________
The table should be ________________________
Answer:
Answer)
Statement showing Analysis of Whether the furnitureshould be sold unpainted or as finished tables
|
Particulars |
Sell Unpainted Furniture(In $) |
Process Further and selland Finished Tables (In $) |
Differential (In$) |
|
Selling Price |
66.00 |
104.00 |
38.00 |
|
Less: |
|||
|
Variable Cost |
45.00 |
65.00 |
20.00 |
|
Fixed Cost |
11.00 |
13.00 |
2.00 |
|
NetIncome |
10.00 |
26.00 |
16.00 |
Alternatively, the following statement of incrementalcost and benefit may be prepared
|
Particulars |
Sell Finished tables (In$) |
|
Increase in Selling Price( $ 104 -$ 66) |
38.00 |
|
Less: |
|
|
Increase in Variable Cost ($ 65-$45) |
20.00 |
|
Increase in Fixed Cost ($ 13 – $11) |
2.00 |
|
Net AdditionalIncome |
16.00 |
Decision: From the perusal of above tables, it isevident that if the company plans to process further and sellfinished tables, it will earn additional net income of $ 16.00 perunit. Therefore, the company should process further and sellfinished tables.
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