Question
XYZ company currently sells unfinished doghouses for $100. The unfinished doghouses currently cost $80 to make which is comprised of $43 for direct materials, $27
XYZ company currently sells unfinished doghouses for $100. The unfinished doghouses currently cost $80 to make which is comprised of $43 for direct materials, $27 for direct materials, $7 for variable MO and $3 for fixed MO. XYZ has noticed that its DIY customer has become its LAZY customer and constantly receives requests to have the doghouses painted and/or stained. Apparently its lazy customer is willing to pay $125 for the painted/stained doghouse. THe additional finishing costs would be as follows: Direct materials $13 (for paint/stain), direct labor $14 and no changes to MO. SHould XYZ continue making unfinished doghouses or should it process further with paint/stain
a. sell unfinished doghouses and make $7 per doghouse.
b. process the doghouses further. This DIY craze is fading the numbers do not matter
c. Sell unfinished doghouses and make $20 per doghouse.
d. Sell unfinished doghouse and make $20 per doghouse
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