Question
Designer Dollhouses manufactures dollhouse kits that are meant to be assembled by customers. Each kit sells for $60 and has $12 in fixed production costs
Designer Dollhouses manufactures dollhouse kits that are meant to be assembled by customers. Each kit sells for $60 and has $12 in fixed production costs and $10 in variable production costs. Rather than selling these kits, the firm is thinking about selling the dollhouses fully assembled for $95 each. The variable costs for assembling one dollhouse are expected to be $4 and the fixed costs are expected to be $10. Given these figures, which of the following statements is accurate?
A : Designer should sell assembled dollhouses rather than dollhouse kits because its net income per unit will be $21 higher.
B : Designer should sell dollhouse kits rather than assembled dollhouses because its net income per unit will be $14 higher.
C : Designer should sell dollhouse kits rather than assembled dollhouses because its net income per unit will be $8 higher.
D : Designer should sell assembled dollhouses rather than dollhouse kits because its net income per unit will be $43 higher.
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