Mesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market.

Question

Mesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $75. Production costs are $35 variable and $11 fixed. Mesa Verde is considering staining and sealing the table to sell it for $107. Variable costs to finish each table are expected to be $22, and fixed costs are expected to be $2.

Prepare an analysis showing whether Mesa Verde should process the tables further. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Sell
Unpainted Process
Further Net Income
Increase (Decrease) Sales per unit $ $ $ Cost per unit    Variable $ $ $    Fixed      Total $ $ $ Net income per unit $ $ $

Explanation / Answer

The company would be at better position if it process the product further. The net income per product would increase by $8 per unit.

Sell unpainted Process further Net income increase/decrease Sales per unit 75 107 32 Cost per unit' Variable 35 57 22 Fixed 11 13 2 Total 46 70 24 Net income per unit 29 37 8

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