Way Living sells unfinished oak shelves for $35 each.Budgeted sales for the year are expected to be 4,000 shelves.Each shelf requires 4 linear feet of wood to produce.The cost of wood is $4.80 per linear foot.Direct labor is $6.00 per shelf.Variable overhead and fixed overhead costs per unfinished shelf are $1.00 and $0.50 respectively.Way Living is considering whether it should stain the shelves so it can sell them for $48.00 each.It estimates it will sell 60% of the budgeted shelves 'stained' with the others unfinished.The direct costs of staining each shelf are $9.00.How much is the incremental effect on profit if the company stains the shelves?
A)$16,000
B)$67,200
C)$52,000
D)None of these answer choices are correct.

Question

Quizplus · Accepted Answer

The incremental effect on profit from staining the shelves can be calculated by considering the additional revenue and additional costs associated with staining. First, calculate the additional revenue from staining:- 60% of 4,000 shelves = 2,400 shelves will be stained.- The increase in selling price per shelf due to staining = $48.00 - $35.00 = $13.00.- Additional revenue from staining = 2,400 shelves * $13.00 = $31,200.Next, calculate the additional costs associated with staining:- Direct costs of staining per shelf = $9.00.- Additional costs from staining = 2,400 shelves * $9.00 = $21,600.Incremental effect on profit = Additional revenue - Additional costs = $31,200 - $21,600 = $9,600.None of the provided choices matches this calculation, so the correct answer is D) None of these answer choices are correct.

Way Living Sells Unfinished Oak Shelves for $35 Each