45.00 points The Scottie Sweater Company produces sweaters under the \"Scottie\"

Question

45.00 points The Scottie Sweater Company produces sweaters under the "Scottie" label. The company buys raw wool and processes it into wool yarn from which the sweaters are woven. One spindle of wool yarn is required to produce one sweater. The costs and revenues associated with the sweaters are given below: Per Sweater Selling price Cost to manufacture 30.00 Raw materials s 2.00 17.00 Buttons, thread, lining Wool yarn Total raw materials Direct labor Manufacturing overhead 19.00 5.60 8.40 33.00 Manufacturing profit (loss) $ (3.00) Originally, all of the wool yarn was used to produce sweaters, but in recent years a market has developed for the wool yam itself. The yarn is purchased by other companies for use in production of wool blankets and other wool products Since the development of the market for the wool yarn, a continuing dispute has existed in the Scottie Sweater Company as to whether the yarn should be sold simply as yarn or processed into sweaters. Current cost and revenue data on the yam are given below Per Spindle of Yarn $ 2000 Selling price Cost to manufacture Raw materials (raw wool) Direct labor Manufacturing overhead $7.00 3 60 6.40 1700 Manufacturing profit S 300 DOLL

Explanation / Answer

Solution:-

Explanation:-

Contribution

(If yarn is further proceeds)

Contribution

(If yarn is not further proceeds)

Decrease in contribution if yarn is further processed into sweaters :- 8.40 - 5.40 = 3.00

Please Rate or comment if you have any doubt regarding this solution.

Decrease in contribution 3.00

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