Novak Inc. makes unfinished bookcases that it sells for $60. Production costs are $38 variable and $10 fixed. Because it has unusedcapacity, Novak is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $9 per unitwith no increase in fixed costs.Prepare an analysis on a per-unit basis that shows whether Novak should sell unfinished or finished bookcases. (If an amount reducesthe net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).)Net IncomeSellProcess FurtherIncrease(Decrease)$$$Sales per unitVariable cost per unitFixed cost per unitTotal per unit cost$Net income per unitThe bookcasesprocessed further.$$

Step 1: Analyze the costs and revenues on a per-unit basis for both scenarios. Selling Unfinished…

Answered: Novak Inc. makes unfinished bookcases…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Vaughn Manufacturing is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $65 and Vaughn Manufacturing would sell it for $145. The cost to assemble the product is estimated at $28 per unit and Vaughn Manufacturing believes the market would support a price of $178 on the assembled unit. What is the correct decision using the sell or process further decision rule and why? Process further because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $28 per unit. O Process further because profits will be greater by $5 per unit. eTextbook and Media Save for Later Attempts: 2 of 3 used Submit Answer
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Pine Street Inc. makes unfinished bookcases that it sells for $62. Production costs are $36 variable and $10 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $70. 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.

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