Answered: Determine whether the company should…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 3PB: Cinnamon Depot bakes and sells cinnamon rolls for $1.75 each. The cost of producing 500,000 rolls in...

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Sell or Process Further

Bear Lake Boat Company manufactures sailboat hulls at a cost of $5,200 per unit. The hulls are sold to boat yards for $6,000. The company is evaluating the desirability of adding masts, sails, and rigging to the hulls prior to sale at an additional cost of $1,500. The completed sailboats could then be sold for $7,000 each.

Determine whether the company should sell sailboat hulls or process them further into complete sailboats. Assume sales volume will not be affected.
Calculate the net advantage (disadvantage) of processing the boat hulls into sail boats. Use a negative sign with your answer, if appropriate.

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