Question

Oficina Bonita Company manufactures office furniture. An unfinished desk is produced for $35.65 and sold for $65.20. A finished desk can be sold for $75.50. The additional processing cost to complete the finished desk is $6.60. Prepare a differential analysis. Round your answers to two decimal places. Differential Analysis Sell Unfinished (Alternative 1) or Process Further into Finished (Alternative 2) Desks Differential Sell Unfinished Desks (Alternative 1) Process Further into Finished Desks (Alternative 2) Effects (Alternative 2) Revenues per desk Costs per desk Profit (loss) per desk $ $ $ Should the company sell unfinished desks or process further and sell finished desks? Oficina Bonita Company should

Answer 1

Differential Analysis Sell Unfinished (Alternative 1) or Process Further into Finished (Alternative 2) Desks Sell Unfinished Desks (Alt. - 1) Process Further into Differential Finished Effects Desks (Alt. - 2) (Alt. - 2) Revenues per desk Costs per desk Profit (Loss) per desk $65.20 $35.65 $29.55 $75.50 $42.25 $33.25 $10.30 $6.60 $3.70 ($75.50 - $65.20) [-$42.25 - $35.65] [$33.25 - $29.55] Oficina Bonita Company Should PROCESS FURTHER & SELL FINISHED DESKS as it yields incremental profit per desk. That is, incremental revenue per desk is more than cost to process further. NOTE: Cost per desk if processed further = $35.65 + $6.60 = $42.25.