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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 (for an employee dedicated to painting/staining) and no changes to MO. Should XYZ continue making unfinished doghouses or should it process further with paint/stain? Sell unfinished doghouses and make $7 per doghouse. Process the doghouses further and make $88 per doghouse. Process the doghouses further. This DIY craze is fading so the numbers do not matter. Sell unfinished doghouses and make $20 per doghouse
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