Please help with the below question

Question 6

In order to diversity its product line and meet the needs of different customers, Jonathan wants to propose to Koren and Jingran two new products for Sleep Well Inc., the Ultra-Soft Bed and the Super-Shinny Bed. These new products are the standard bed (with mattress) manufactured by Sleep Well Inc. with some additional work on them. For the Ultra-Soft Bed, an extra layer of mattress is applied, and for the Super-Shinny Bed, no extra layer of mattress is applied but extra shiny bolts are added. Page 8 of 10

Regarding the Ultra-Soft Bed, attaching another layer of mattress takes an additional 2 hours of direct manufacturing activity (assembly) for each bed; the additional layer of mattress requires 2 square meters of fabrics and 1 kilogram of extra soft foam for each bed. The extra soft foam is 400% more expensive than the foam used for the standard bed and the additional fabrics used for the Ultra-Soft Bed is the same as those applied to the standard beds. Regarding the Super-Shinny bed, adding the extra shiny bolts take an additional 1 hour of assembly for each bed and 10 additional shiny bolts for each bed. These shiny bolts are 200% more expensive than the normal bolts used for the standard product.

Whereas a unit of the standard bed (with mattress) is sold by $900 per unit, Jonathan says the Ultra-Soft Bed could be sold by $1,000 so Sleep Well Inc. would make more money with this new product. However, Jonathan is not sure which price would be appropriate for the Super-Shinny Bed.

Required

Koren and Jingran are skeptical about the two new fancy beds that Jonathan proposed and have asked you to crunch the numbers and show whether it is worth processing the standard bed into the Ultra-Soft Bed and selling it for $1,000. Koren and Jingran also want to know which is the minimum price Sleep Well Inc. should charge for a Super-Shinny Bed for it being worth processing further from a standard bed. (Sell or process further, Chapter 6, 10 marks)

Jonathan is reviewing the activities for the past year. Sleep Well Inc. rents a small administrative office in Melbourne's central business district (CBD) for $40,000 per year and a large warehouse in Geelong for $60,000 per year. Sleep Well Inc. has a staff handling all the administrative work in the office in CBD, and pays the staff with an annual salary of $60,000. Sleep Well Inc. has hired a professional marketing firm for managing the sales and this marketing firm charges a commission of $15 for each completed sale; each sale equals one bed sold. The invoicing system used by Sleep Well is outsourced and for each sale completed the outsourced firm charges $5; each sale equals one bed sold. The miscellaneous cost that incurred in the administrative office was $4,000, mostly costs with the lease of material and stationery, and this yearly cost is expected to remain the same amount for years to come. In the warehouse in Geelong there is one full-time employee who gets paid $80,000 per year for supervising the casual staff working in the warehouse. The warehouse had miscellaneous costs of $8,000 in the past year and is expected to remain the same amount for years to come. Sleep Well Inc. has a contract with a delivery firm for delivering the beds to their clients, but Jonathan is not able to find the contract and is not sure how much the delivery firm charges per transaction. The only information he can gather is regarding the past few years: Table 1 - Annual unit delivery and costs Year Delivery Cost Units Delivered 2016 470 2017 550 $758 $870 $940 $1,010 2018 2019 600 650 Below is a table listing all the material used during the past year to manufacture 500 beds and the costs incurred. There was no stock or work in process in the beginning end of the year. Table 2 - Material costs Material Quantity Total Cost Fabric 1,500 m2 $3,000 Timber 6000 Units $36,000 Foam 500 Kilograms $500 Button stud 5,000 Units $500 Varnish 500 Litres $10,000 Bolt 5,000 Units $500 The manufacturing activity is made by casual staff. The first stage is the woodworking, where a carpenter is hired by $20 per hour for working with the timber. This task is very labour intensive and for preparing the material a carpenter takes 5 hours per bed. Once the timber is ready for being assembled, a casual staff is paid $30 per hour for assembling the bed frame with the bolts and then adding (fabric, foam, and button studs) to make the mattress attached to the bed frame. The assembling takes only 2 hours per bed. The final stage of manufacturing is varnishing the bed frame. A casual staff is paid $30 per hour for varnishing the bed frame and this task takes 1 hours