Tian Yang 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. Tian has put together a variety of raw material kits, each including materials at various stages of completion. Unfortunately, owing to space limitations, Tian 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 Tian HK$160 and sells for HK$300. 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. Tian 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 HK$180 per hour. Because she is more efficient at cutting and dying reeds than her average customer, Tian is able to make two kits of the dyed reeds, in one hour, from one kit of undyed reeds. The Stage 2 kit sells for HK$360.

Instructions

Determine whether Tian’s basketweaving studio should carry the basic introductory kit with undyed and uncut reeds or the Stage 2 kit with reeds already dyed and cut. Prepare an incremental analysis to support your answer.