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PART 1-(8 POINTS) Chang Weaving is a cloth manufacturing company based in China, which imports threads of various fibers and exports both bolts of cloth

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PART 1-(8 POINTS) Chang Weaving is a cloth manufacturing company based in China, which imports threads of various fibers and exports both bolts of cloth and finished products. Chang recently began purchasing and processing Rayon fiber, which is used in many sporting clothes. Chang is considering whether to sell bolts of Rayon cloth or to further process the cloth into sporting outfits. Information regarding the production process for Rayon is as follows: To produce a bolt of cloth: Direct Materials: $1,000 Direct Labor: 60 hours at $20/hour Variable Overhead: 100 machine hours at a rate of $13/machine hour Fixed overhead: $10/machine hour Selling price of a bolt of cloth: $5,000 Extra costs to further process a bolt of cloth into finished goods: Direct Materials: $100 Direct Labor: 250 hours, at $20/hour Variable Overhead: 20 machine hours, at a rate of $13/machine hour Fixed overhead: $10/machine hour Selling price of items produced from one bolt of cloth: $11,000 Required: 1. Compute the differential income or loss of processing the cloth further. 2. Should Chang process the cloth further or just sell the bolts of cloth

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