Wood World manufactures many wooden products. One of its popular product lines is the wooden crate line. It currently produces 100,000 crates monthly and this production volume represents 80% of capacity. These crates are sold in their unfinished form (no paint or stain) and are used by individuals and businesses in various ways. College students often stack them to make shelves and storage areas. Wood World is considering adding paint, various stains and even decoupage to 25% of the crates and selling them as their designer crate line. A single unfinished crate consists of $7 in direct materials, $12 in direct labor, $3 in variable manufacturing overhead $5 in fixed manufacturing overhead and sells for $40. The designer crate line would add the following: $4 in direct materials, $8 in direct labor, and $2 in variable manufacturing overhead and $1 in additional fixed costs. Market studies indicate a designer crate can be sold for $55.

A. Should Wood World sell all the crates in the unfinished form or should it process them further into designer crates? Why? (be sure to back up your explanation with numbers)

B. Would your answer change if Wood World was operating at capacity? Why or why not?

C. What are three non-quantitative issues Wood World should consider in making this decision?