Anna Garden recently opened her own basketweaving studio. She sells nished baskets in addition to selling the raw materials needed by customers to weave baskets of their own. Unfortunately, owing to space limitations, Anna is unable to carry all varieties of kits originally assembled and must choose between two basic packages. The Basic Kit includes undyed, uncut reeds (with dye included) for weaving one basket. This basic package costs Anna $8 and sells for $22. The second kit, called Stage 2, includes cut reeds that have already been dyed. With this kit the customer need only soak the reeds and weave the basket. Anna produces the Stage 2 kit by using the materials included in the Basic Kit. Because she is more efcient at cutting and dying reeds than her average customer, Anna is able to produce two Stage 2 kits in one hour from one Basic Kit. (She values her time at $22 per hour.) The Stage 2 kit sells for $34. Net Income Sell Process Further Increase (Basic Kit) (Two Stage 2 Kits) (Decrease) Sales per unit to 22 to 34 8 Costs per unit Direct materials tA 8 $ 8 $ Direct labor 0 11 i 11 Total $ 8 $ 20 $ Net income per $ unit 14 $ 14 $