Wanda Sublette recently opened her own basketweaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Wanda has put together a variety of raw material kits, each including materials at various stages of completion. Unfortunately, owing to space limitations, Wanda is unable to carry all varieties of kits 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 Wanda $13.17 and sells for $27.43. The second kit, called Stage 2, includes cut reeds that have already been dyed. With this kit the customer need only soak the reeds and weave the basket. Wanda is able to produce the second kit by using the basic materials included in the first kit and adding one hour of her own time, which she values at $20.99 per hour. Because she is more efficient at cutting and dying reeds than her average customer, Wanda is able to make two kits of the dyed reeds, in one hour, from one kit of undyed reeds. The kit of dyed and cut reeds sells for $35.68.
Complete the incremental analysis below to determine whether Wanda's basketweaving shop should carry the basic introductory kit with undyed and uncut reeds, or the Stage 2 kit with reeds already dyed and cut. (Round answers to 2 decimal places, e.g. 2.25. If answer is zero, please enter 0. Do not leave any fields blank. If amount decreases the income, use either a negative sign preceding the number eg -45 or parentheses eg (45). Enter all amounts in the columns "Sell (Basic Kit)" and "Process Further (Stage2 Kit)" as positive amounts and subtract where necessary.)
Sell
- (Basic Kit) Process Further
- (Stage 2 Kit) Net Income
- Increase (Decrease)
- Sales per unit $
- Costs per unit
- Direct materials $ $ $
- Direct labor
Total $
Net income per unit $
Should Wanda carry the Stage 2 kits?