Brief Exercise 20-5 Pine Street Inc. makes unfinished bookcases that it sells fo

Question

Brief Exercise 20-5 Pine Street Inc. makes unfinished bookcases that it sells for $58.57. Production costs are $38.03 variable and $9.98 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $72.40. Variable finishing costs are expected to be $7.45 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 s Variable Fixed Total Net income per units The bookcases Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Analysis on per unit basis showing whether Pine street should sell unfinished or finished bookcases Sell Unfinished Process Further Net Income Increase (Decrease) Sales price per unit $58.57 $72.40 $13.83 Cost per unit Variable $38.03 $45.48 -$7.45 Fixed $9.98 $9.98 $0.00 Total $48.01 $55.46 -$7.45 Net Income per unit $10.56 $16.94 $6.38 The bookcases should be processed further as there is $6.38 per unit increase in Net Income.

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