5.

Chino Company manufactures fabric and clothing. Managers can either sell the unfinished fabric to other clothing manufacturers or incur additional conversion costs to create a finished garment. The costs incurred to produce the unfinished fabric are $400,000, which are allocated to the products based on the sales value of the unfinished fabric. Following is information concerning the clothing that can be produced from the fabric: Number of Product Units Pants 6,000 Shirts 12,000 Coats 4,000 Selling Price of Unfinished Fabric $20.00 23.20 38.80 Selling Price after Additional Processing Processing Further Cost $30.00 $28,450 32.40 64,400 43.20 18,300 Required: 2-a. Calculate the increase or decrease in profit if the products are processed further. (Enter all values as positive values.) Profit Pants Shirts Coats 2-b. Which products should be sold as unfinished fabric and which should be further processed? Action Pants Shirts Coats 3. Assume that the $400,000 in costs is allocated based on the number of units of output. Which products should be sold as unfinished fabric and which should be further processed? Action Pants Shirts Coats