Question

Exercise 20-9 (Part Level Submission)

Anna Garden 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. Anna has put together a
variety of raw material kits, each including materials at various
stages of completion. Unfortunately, owing to space limitations,
Anna 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 Anna $18
and sells for $32. 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. Anna 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 $28
per hour. Because she is more efficient at cutting and dying reeds
than her average customer, Anna 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 $41.

[Collapse question part]

(a1)

Prepare an incremental analysis for the Anna’s basketweaving
studio. (Enter negative amounts using either a negative sign
preceding the number e.g. -45 or parentheses e.g. (45).)

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 $

$

$

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Answer #1

Ans)

Particulars | Sell (Basic kit) | Process further (Stage 2 kit) | Net income increase / (Decrease) |

Sales per unit | 32 | 41 | 9 |

Cost per unit: | |||

Direct materials (a) | 18 | 9 | 9 |

Direct labour(b) | - | 14 | (14) |

Total cost (a+b) | 18 | 23 | (5) |

Net income per unit | 14 | 18 | 4 |

Anna Garden should processthe kits further as it results in incremental revenue as shown above.

(1) Cost of Material in stage 2 has decreased as Anna can make 2 kits in stage 2 from thematerials for a basic kit. Therefore the kit shall now cost $9 instead of $18

(2) The total time taken to make two kits is one hour at $28 or $14 per Kit.

Anna Garden recently opened her own basketweaving studio. She
sells finished baskets in addition to selling the raw materials
needed by customers to weave baskets of their own. Unfortunately,
owing to space limitations, Anna is unable to carry all varieties
of kits originally assembled and must choose between two basic
packages.
The Basic Kit includes undyed, uncut reeds (with dye included) for
weaving one basket. This basic package costs Anna $8 and sells for
$21. The second kit, called Stage...

Anna Garden recently opened her basketweaving studio. She sells
finished baskets in addition to selling the raw materials needed by
customers to weave baskets of their own. Unfortunately, owing to
space limitations, Anna is unable to carry all varieties of kits
originally assembled and must choose between two essential
packages. The Basic Kit includes undyed, uncut reeds (with dye
included) for weaving one basket. This basic package costs Anna $18
and sells for $35. The second kit, called Stage 2,...

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