Shamrock Design Inc, a high-fashion women's dress manufacturer, is planning to market a new cocktail dress for the coming season Shamrock Design supplies retailers in Toronto, Montreal, and the Atlantic provinces. Four metres of material are laid out for the dress pattern. After cutting some material remains, which can be sold as remnants. The company could also use the leftover material to manufacture a matching cape and handbag. However, ifit uses the leftover material for the cape and handbag, more care will be needed in the cutting, and the cutting costs will therefore increase The company expects to sell 1,200 dresses if a matching cape and handbag are not available. Shamrock Design's market research reveals, however, that dress sales would be 25% higher if a matching cape and handbag were available. The market research indicates that the cape and/or handbag could not be sold individually but only as accessories with the dress. The various combinations of dresses, capes, and handbags that retailers will sell are as follows: Complete sets of dress, cape, and handbag 7096 Dress and cape 6% Dress and handbag 1496 Dress only 1096 Total 100% The material used in the dress costs $13.00 a metre or $51.00 for each dress. The cost of cutting the dress If the cape and handbag are not manufactured is estimated at $20.00 a dress and the resulting remnants can be sold for $5.00 for each dress cut out. If the cage and handbag are to be manufactured the cutting costs will be increased by $10.00 per dress. There will be no saleable remnants if the capes and handbags are manufactured in the quantities estimated The material used in the dress costs $13.00 ametre, or $51.00 for each dress. The cost of cutting the dress if the cape and handbag are not manufactured is estimated at $20.00 a dress, and the resulting remnants can be sold for $5.00 for each dress cut out. If the cape and handbag are to be manufactured, the cutting costs will be increased by $10.00 per dress. There will be no saleable remnants if the capes and handbags are manufactured in the quantities estimated. The selling prices and the costs to complete the three items once they are cut are as follows: Selling Price per Unit Unit Cost to Complete" Dress $204.00 $85.00 Cape 30.00 25.00 Handbag 12.00 8.00 * Excludes cost of material and cutting, Calculate operating Income if only the dress is cut and sold Operating income $ Calculate operating income if the dress and accessories are produced and sold (Round answer to decimal places, es 125) Operating income Calculate incremental profit. (Round answer to O decimal places, es 125.) Incremental profit $ Based on your analysis, what decision should management male? Management should
