Box Corporation has some unfinished bookcases. The cost to produce each one is $10 in manufacturing...
Box Corporation has some unfinished bookcases. The cost to produce each one is $10 in manufacturing costs and they can be sold in their current condition for $27 each.
If they spend $22 to finish the bookcases, they could be sold for $60 each.
What should they do? Provide a differential analysis. Put a zero in any space that would be left blank.
|
PROCESSS FURTHER |
SELL. AS IS |
DIFFERENCE PROCESS - AS IS |
|
| Sales price |
$ 331160282232271710 |
$ 331160282232271710 | $ 331160282232271710 |
| Cost to manufacture |
- 331160282232271710 |
- 331160282232271710 | - 331160282232271710 |
| Contibution margin per unit | $ 331160282232271710 |
$ 331160282232271710 |
$ 331160282232271710 |
They should Choose...sell unfinished (as is)process further (finished bookcases) .
Homework Answers
Solution:
|
Sell As it is |
Process Further |
Difference = Process Further - Sell As it is |
|
|
Sale Price $ |
27.00 |
60.00 |
33.00 |
|
Less: Cost of Manufacturing |
|||
|
Existing Cost of Manufacturing $ |
10.00 |
10.00 |
0.00 |
|
Cost of Completion $ |
0.00 |
22.00 |
22.00 |
|
Total Cost $ |
10.00 |
32.00 |
22.00 |
|
Profit per Unit $ |
17.00 |
28.00 |
11.00 |
If the company processes further and finishes the Book cases by spending additional $22 per unit, the company makes a profit $28.00 per Unit.
Hence, it is recommended to Box Corporation to process the units further as it increases the profit per unit by $11 as compared to selling the units as it is.
Add Answer to:
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