Business

Question

Sunland Company is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and Sunland would sell it for $62. The cost to assemble the product is estimated at $26 per unit and the company believes the market would support a price of $87 on the assembled unit. What decision should Sunland make

1 Answer

  • Answer: Sell before assembly, the company will be better off by $1 per unit.

    Explanation:

    To solve the above question, we need to calculate the incremental profit or loss first. This will be:

    = After assembling sales value - Unassembled unit sales value - Coat if further processing

    = $87 - $62 - $26

    = -$1

    Since there is an incremental loss of $1, then the correct answer is "Sell before assembly, the company will be better off by $1 per unit".

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