Question

Pine Street Inc. makes unfinished bookcases that it sells for $62. Production costs are $36 variable and $10 fixed. Because it has unused capacity, Pine 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 Pine Street should sell unfinished or finished bookcases. (Round answers to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Sell Unfinished		Process Further		Net Income Increase (Decrease)
Sales price per unit		$		$		$
Cost per unit
Variable
Fixed
Total
Net income per unit		$		$		$

The bookcases should be processed furthershould be sold without further processing.

Answer 1

	Sell Unfinished	Process Further	Net Income Increase (Decrease)
	In $	In $	In $
Sale price per unit	62	70	8
Cost per Unit
- Variable cost	36	42	-6
- Fixed cost	10	10	0
Total	46	52	-6
Net Income per unit	16	18	2
As net income per unit increases by $2 per unit if finished book cases are sold ,hence book cases should processed further.