Sharon Lee recently opened her own basket-weaving studio. She sells finished baskets in addition to the...

 

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Sharon Lee 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. Sharon has put together a variety of raw material kits, with each kit including materials at various stages of completion. Unfortunately, because of space limitations, Sharon 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 Sharon $15 and sells for $29. 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. Sharon 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 eg.-15,000 or parenthesis, eg. (15,000).) Per unit selling price Costs: Materials Labour Total costs Incremental revenue $ Process Net Income Sell Basic Kit Further Stage 2 Kit Increase (Decrease) $ Determine whether Sharon'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. Sharon's basket-weaving studio carry the Stage 2 kits. Sharon Lee 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. Sharon has put together a variety of raw material kits, with each kit including materials at various stages of completion. Unfortunately, because of space limitations, Sharon 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 Sharon $15 and sells for $29. 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. Sharon 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 eg.-15,000 or parenthesis, eg. (15,000).) Per unit selling price Costs: Materials Labour Total costs Incremental revenue $ Process Net Income Sell Basic Kit Further Stage 2 Kit Increase (Decrease) $ Determine whether Sharon'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. Sharon's basket-weaving studio carry the Stage 2 kits.