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can someone explain these three questiond through spreadsheets please. CASE 13-29 Sell or Process Further Decision LO13-7 The Scottie Sweater Company produces sweaters under the

can someone explain these three questiond through spreadsheets please.
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CASE 13-29 Sell or Process Further Decision LO13-7 The Scottie Sweater Company produces sweaters under the "Scottie" label. The company buys raw wool and processes it into wool yarn from which the sweaters are woven. One spindle of wool yarn is required to produce one sweater. The costs and revenues associated with the sweaters are given below: Originally, all of the wool yarn was used to produce sweaters, but in recent years a market has developed for the wool yarn itself. The yarn is purchased by other companies for use in production of wool blankets and other wool products. Since the development of the market for the wool yarn, a continuing dispute has existed in the Scottie Sweater Company as to whether the yarn should be sold simply as yam or processed into sweaters. Current cost and revenue data on the yarn are given below: The market for sweaters is temporarily depressed, due to unusually warm weather in the western states where the sweaters are sold. This has made it necessary for the company to discount the selling price of the sweaters to $30 from the normal $40 price. Since the market for wool yarn has remained strong, the dispute has again surfaced over whether the yarn should be sold outright rather than processed into sweaters. The sales manager thinks that the production of sweaters should be discontinued; she is upset about having to sell sweaters at a $2.50 loss when the yarn could be sold for a $4.00 profit. However, the production superintendent does not want to close down a large portion of the factory. He argues that the company is in the sweater business, not the yarn business, and the company should focus on its core strength. All of the manufacturing overhead costs are fixed and would not be affected even if sweaters were discontinued. Manuficturing overhead is assigned to products on the basis of 150% of direct labor cost. Materials and direct labor costs are variable. Page 617

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