Question

Helg Seve 3 The Scotie Sereate Compiny aroduces onea es ndet he congary buysre yarn trom which the sweaters are woven, One spinide of wool yami requred to produce one siesters required to produce one sweater. The costs and revenues Selling geice Cost to manufacture Buttana, thread, 1ining Total r aterials tanufactorins overhd anufacturing profit (3ass) Originally. all of the wool yarn was used to produce swearers, but in resent years a maiket bas developed for the yarn is purchased by other companies for use in produetsion of ywool bansets and other waol products. Since tme development of the market for the wool yarm a conthuing diepute has existed inshe Sore 5weater Campany ag to wnether the yarn shoud be sod simply e yein or processed into sweaters crent cost and revente dato on the yeh are gven beow wool yarn nset The Selling price

please just full the fills, explanation is not necessary.

Answer 1

1) Financially the company is in disadvantage position on further processing wool yarn
into a sweater as further processing is getting loss of $4 per unit.
2) There is a recommendation to sell the wool yarn outright as it will fetch profit of
$5 per unit to the company.
3) As by selling wool yarn outright, the company is able to cover its fixed overhead,
so the lowest price that the company would accept for sweater would be a one
where it will cover its fixed overhead ie. $42 per unit.