Question
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
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:
| Product | Number of Units | Selling Price of Unfinished Fabric | Selling Price after Processing Further | Additional Processing Cost |
| Pants | 6,000 | 20.00 | 30.00 | $28, 450 |
| Shirts | 12,000 | 23.20 | 32.40 | 64,400 |
| Coats | 4,000 | 38.80 | 43.20 | 18,300 |
Required: Calculate the increase or decrease in profit if the products are processed further. (PLEASE SHOW WORKINGS)
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Finance And Accounting For Nonfinancial Managers
Authors: Steven A. Finkler
3rd Edition
0735546045, 9780735546042
