Smell the Roses Pottery (SRP) makes plain vases with the following information. Smell the Roses Pottery...

Transcribed Image Text:

Smell the Roses Pottery (SRP) makes plain vases with the following information. Smell the Roses Pottery Plain Vase Information per unit Sales Plain Vases Direct Materials Direct Labor Variable Overhead Fixed Overhead Total Product Cost Variable selling expense (4% of sales dollars) Fixed selling expense 60 4 15 7.50 10.50 37 2.40 .50 Total 1,800,000 120,000 450,000 225,000 315,000 1,110,000 72,000 15,000 SRP believes that if they add additional decoration to the vases, they can be sold for $100/each. They estimate the market demand for decorated vases is 10.000 units. They do not have capacity to make additional plain vases, so the opportunity cost of making the decorated vases is that they would sell less plain vases. The incremental cost to process the plain vases further into decorated vases includes $8 per unit of direct materials, $13 per unit of direct labor and $8.45 per unit of variable overhead. In order to create the decorations. SRP would need a buy a machine for $100.000. They estimate that they could use the machine in operations for 10 years and that the salvage value is $0. Perform the calculations to analyze whether SRP should process the plain vases further to create decorated vases. Use whole dollars only. Do not use the dollar sign ($). Smell the Roses Pottery (SRP) makes plain vases with the following information. Smell the Roses Pottery Plain Vase Information per unit Sales Plain Vases Direct Materials Direct Labor Variable Overhead Fixed Overhead Total Product Cost Variable selling expense (4% of sales dollars) Fixed selling expense 60 4 15 7.50 10.50 37 2.40 .50 Total 1,800,000 120,000 450,000 225,000 315,000 1,110,000 72,000 15,000 SRP believes that if they add additional decoration to the vases, they can be sold for $100/each. They estimate the market demand for decorated vases is 10.000 units. They do not have capacity to make additional plain vases, so the opportunity cost of making the decorated vases is that they would sell less plain vases. The incremental cost to process the plain vases further into decorated vases includes $8 per unit of direct materials, $13 per unit of direct labor and $8.45 per unit of variable overhead. In order to create the decorations. SRP would need a buy a machine for $100.000. They estimate that they could use the machine in operations for 10 years and that the salvage value is $0. Perform the calculations to analyze whether SRP should process the plain vases further to create decorated vases. Use whole dollars only. Do not use the dollar sign ($).

Answer rating: 100% (QA)

Analyze whether Smell the Roses Pottery SRP should process the plain vases further to create decorat... View the full answer