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Sell or process-further decision:
The purpose of sell or process-further decision is to choose an appropriate alternative that maximizes the operating income. It uses incremental analysis which determines the incremental revenue.
Incremental revenue refers to the difference in the total revenue earned when the product or service is sold at split-off point and the total revenue earned when the product or service is sold after further processing.
If the incremental revenue is more than the incremental costs, the product should be sold after further processing. If the incremental revenue is lesser than the incremental costs, the product should be sold at split-off point.
To prepare: An analysis on a per unit basis to show whether P Company must sell unfinished or finished bookcases.
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Chapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making 7e Binder Ready Version + WileyPLUS Registration Card
- Shelby Industries has a capacity to produce 45.000 oak shelves per year and is currently selling 40,000 shelves for $32 each. Martin Hardwoods has approached Shelby about buying 1,200 shelves for a new project and is willing to pay $26 each. The shelves can be packaged in bulk; this saves Shelby $1.50 per shelf compared to the normal packaging cost. Shelves have a unit variable cost of $27 with fixed costs of $350,000. Because the shelves dont require packaging, the unit variable costs for the special order will drop from $27 per shelf to $25.50 per shelf. Shelby has enough idle capacity to accept the contract. What is the minimum price per shelf that Shelby should accept for this special order?arrow_forwardWildhorse Street Inc. makes unfinished bookcases that it sells for $59. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Wildhorse Street is considering finishing the bookcases and selling them for $73. Variable finishing costs are expected to be $7 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Wildhorse Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sales price per unit Cost per unit Variable Fixed Total $ Net income per unit $ Sell The bookcases should be processed further 59 38 10 48 11 $ $ Process Further 73 10 $ $ Net Income Increase (Decrease) -14 0arrow_forwardCullumber Street Inc. makes unfinished bookcases that it sells for $59. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Cullumber Street is considering finishing the bookcases and selling them for $71. 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 Cullumber Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45).) Sales price per unit $ Cost per unit Variable Fixed Total Sell Process Further $ $ Net Income Increase (Decrease) Net income per unit SUPPORT $ $ $arrow_forward
- Pine Street Inc. makes unfinished bookcases that it sells for $59. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Pine Street is considering finishing the bookcases and selling them for $75. Variable finishing costs are expected to be $8 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. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheseseg (45).) Net Income Increase (Decrease) Process Sell Further $ $ $ Sales price per unit Cost per unit Variable Fixed Total $ $ Net income per unit The bookcases 3:02 P 11/10/20arrow_forwardHELP MEarrow_forwardPine Street Inc. makes unfinished bookcases that it sells for $57. Production costs are $38 variable and $10 fixed. Because it has unused capacity. Pine Street is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $8 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. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45)) Sales price per unit Cost per unit Variable Fixed Total Net income per unit $ The bookcases Sell Process Further Net Income Increase (Decrease)arrow_forward
- Crane Street Inc. makes unfinished bookcases that it sells for $58. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Crane Street is considering finishing the bookcases and selling them for $71. Variable finishing costs are expected to be $8 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Crane Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45)) Sales price per unit Cost per unit Variable Fixed Total Net income per unit The bookcases $ Sell Process Further Net Income Increase (Decrease)arrow_forwardSheridan manufactures unpainted furniture for the do-it-yourself market. It currently sells a table for $65. Production costs are $35 variable and $10 fixed. Sheridan is considering staining and sealing the table to sell it for $100. Variable costs to finish each table are expected to be $13, and fixed costs are expected to be $1. Prepare an analysis showing whether Sheridan should sell unpainted or finished tables. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Incremental revenue $ Incremental cost $ Increase (decrease) in contribution margin Sheridan eTextbook and Media process the tables further. Net Income Increase (Decrease) SUPPORTarrow_forwardHazel Company makes an unassembled product that it currently sells for $55. Production costs are $20. Hazel is considering assembling the product and selling it for $68. The cost to assemble the product is estimated at $12. What decision should Hazel make? Â A) Sell before assembly; net income per unit will be $12 greater. Â B) Sell before assembly; net income per unit will be $1 greater. Â C) Process further; net income per unit will be $13 greater. Â D) Process further; net income per unit will be $1 greater. Â 24 Â E) none of the abovearrow_forward
- Mesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $69. Production costs per unit are $45 variable and $15 fixed. Mesa Verde is considering staining and sealing the table to sell it for $100. Variable costs per unit to finish each table are expected to be an additional $17 per unit, and fixed costs are expected to be an additional $4 per unit. Prepare an analysis showing whether Mesa Verde should sell unpainted or finished tables. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sales price per unit Cost per unit Variable Fixed Total Net income per unit The tables should be SA $ Sell 59 SA Process Further S $ $ Net Income Increase (Decrease)arrow_forwardConcord, Inc. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $13, while the cost of assembling each unit is estimated at $15. Unassembled units can be sold for $54, while assembled units could be sold for $60 per unit. What decision should Concord make? O Sell before assembly; the company will save $9 per unit. Process further; the company will save $9 per unit. O Process further; the company will save $6 per unit. O Sell before assembly; the company will save $4 per unit.arrow_forwardMesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $75. Production costs per unit are $40 variable and $10 fixed. Mesa Verde is considering staining and sealing the table to sell it for $100. Unit variable costs to finish each table are expected to be an additional $19 per table, and fixed costs are expected to be an additional $3 per table.Prepare an analysis showing whether Mesa Verde should sell stained or finished tables. Please solve this if any more information is needed let me know.arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College