Rachel Rey recently opened her own basketweaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Rachel has put together a variety of raw material kits, each including materials at various stages of completion. Unfortunately, owing to space limitations, Rachel is unable to carry all varieties of kits originally assembled and must choose between two basic packages. The basic introductory kit includes undyed, uncut reeds (with dye included) for weaving one basket. This basic package costs Rachel $14 and sells for $30. 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. Rachel is able to produce the second kit by using the basic materials included in the first kit and adding one hour of her own time, which she values at $20 per hour. Because she is more efficient at cutting and dying reeds than her average customer, Rachel is able to make two kits of the dyed reeds, in one hour, from one kit of undyed reeds. The Stage 2 kit sells for $36.

Exercise 20-9 Rachel Rey recently opened her own basketweaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Rachel has put together a variety of raw material kits, each including materials at various stages of completion. Unfortunately, owing to space limitations, Rachel is unable to carry all varieties of kits originally assembled and must choose between two basic packages The basic introductory kit includes undyed, uncut reeds (with dye included) for weaving one basket. This basic package costs Rachel $14 and sells for $30. 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. Rachel is able to produce the second kit by using the basic materials included in the first kit and adding one hour of her own time, which she values at $20 per hour. Because she is more efficient at cutting and dying reeds than her average customer, Rachel is able to make two kits of the dyed reeds, in one hour, from one kit of undyed reeds. The Stage 2 kit sells for $36 Your answer is partially correct. Try agairn Prepare an incremental analysis for the Rachel's basketweaving shop. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sell Basic Kit Process Further (Two Stage 2 Kits) et Income Increase Decrease Sales per unit 30 36 6 Costs per unit Direct materials 14 14 Direct labor 10 10 Total 14 14 Net income per unit 16 6