A yard tool manufacturer can produce either metal shovels or rakes. Given the following estimated operating data, use differential analysis to determine which product would result in the highest net income?

Assume the manufacturer currently produces rakes. What are the incremental revenues and costs if the rakes are replaced with shovels?

\begin{tabular}{|l|r|r|} \hline & \multicolumn{1}{|c|}{ Shovels } & Rakes \\ \hline Units produced and sold & 260,000 & 325,000 \\ \hline Unit selling price & $39.00 & $26.00 \\ \hline Manufacturing costs: & & \\ \hline Variable (per unit) & $23.00 & $12.00 \\ \hline Fixed (total) & $780,000 & \\ \hline Selling and administrative expenses: & & \\ \hline Variable (per unit) & $3.00 & $3.00 \\ \hline Fixed (total) & $182,000 & \\ \hline \end{tabular} \begin{tabular}{|c|c|} \hline Incremental revenue: & \\ \hline Revenue forgone on rakes & $ \\ \hline Additional revenue from shovels price & 0 \\ \hline Incremental revenue & $ \\ \hline Incremental costs: & \\ \hline Additional cost of goods sold & $ \\ \hline Savings on rakes not produced & 0 \\ \hline Savings on selling and administrative & 0 \\ \hline Incremental costs & 0 \\ \hline Net differential cost of producing shovels & $ \\ \hline \end{tabular} \begin{tabular}{|l|r|r|} \hline & \multicolumn{1}{|c|}{ Shovels } & Rakes \\ \hline Units produced and sold & 260,000 & 325,000 \\ \hline Unit selling price & $39.00 & $26.00 \\ \hline Manufacturing costs: & & \\ \hline Variable (per unit) & $23.00 & $12.00 \\ \hline Fixed (total) & $780,000 & \\ \hline Selling and administrative expenses: & & \\ \hline Variable (per unit) & $3.00 & $3.00 \\ \hline Fixed (total) & $182,000 & \\ \hline \end{tabular} \begin{tabular}{|c|c|} \hline Incremental revenue: & \\ \hline Revenue forgone on rakes & $ \\ \hline Additional revenue from shovels price & 0 \\ \hline Incremental revenue & $ \\ \hline Incremental costs: & \\ \hline Additional cost of goods sold & $ \\ \hline Savings on rakes not produced & 0 \\ \hline Savings on selling and administrative & 0 \\ \hline Incremental costs & 0 \\ \hline Net differential cost of producing shovels & $ \\ \hline \end{tabular}