Question

Pine Street Inc. makes unfinished bookcases that it sells for $59. Production costs are $38 variable and $10fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $73. 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. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		enter the sales price per unit in dollars		enter the sales price per unit in dollars		enter the sales price per unit in dollars
		enter the variable cost per unit in dollars		enter the variable cost per unit in dollars		enter the variable cost per unit in dollars
		enter the fixed cost per unit in dollars		enter the fixed cost per unit in dollars		enter the fixed cost per unit in dollars
		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts
		enter net income per unit in dollars		enter net income per unit in dollars		enter net income per unit in dollars

select an option                                                          should be sold without further processingshould be processed further

Answer 1

	Sell unfinished bookcases	Sell finished bookcases	Increase/Decrease in income
Sale price per unit	59	73	14
variable cost per unit	- 38	- 44	- 6
fixed cost per unit	- 10	- 10	0
Total cost per unit	- 48	- 54	- 6
net income per unit	$11	$19	$8

unfinished bookcases should be processed further since by further processing, net income per unit will increase by $8.