Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your answer is partially correct. Barbara Jones recently opened her own basket-weaving studio. She sells finished baskets in addition to the raw materials needed by
Your answer is partially correct. Barbara Jones recently opened her own basket-weaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Barbara has put together a variety of raw material kits, with each kit including materials at various stages of completion. Unfortunately, because of space limitations, Barbara is unable to carry all the varieties of kits she 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 Barbara $15 and sells for $30. The second kit, called Stage 2, includes cut reeds that have already been dyed. With this kit, the customer only has to soak the reeds and weave the basket. Barbara is able to produce the second kit by using the basic materials included in the first kit and adding one-half hour of her own time, which she values at $18 per hour. The kit of dyed and cut reeds sells for $33. Prepare an incremental analysis. (If an amount reduces the net income then enter with a negative sign preceding the number e.g.-15,000 or parenthesis, e.g. (15,000).) Sell Basic Kit Process Further Stage 2 Kit Net Income Increase (Decrease) $ 30 $ 33 $ 3 Per unit selling price Costs: 15 i 15 i Materials 0 18 Labour 15 i 33 18 Total costs $ 15 $ 0 $ 15 Incremental revenue Determine whether Barbara's basket-weaving shop should carry the basic introductory kit with undyed and uncut reeds or the Stage 2 kit with reeds already dyed and cut. Barbara's basket-weaving studio should not carry the Stage 2 kits
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started