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Unformatted text preview: capacity that is expected to continue indefinitely. Management concludes that some of this capacity can be used to finish the tables and sell them at $60 per unit. For a finished table, direct materials will increase $2 and direct labor costs will increase $4. Variable manufacturing overhead costs will increase by $2.40 (60% of direct labor). No increase is anticipated in fixed manufacturing overhead. Illustration 23-8 shows the incremental analysis on a per unit basis. Illustration 23-8 Incremental analysis—sell or process further Helpful Hint Current net income is known. Net income from processing further is an estimate. In making its decision, management could add a “risk” factor for the estimate. It is advantageous for Woodmaster to process the tables further. The incremental revenue of $10.00 from the additional processing is $1.60 higher than the incremental processing costs of $8.40....
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- Fall '11
- Revenue, Incremental Analysis, incremental processing costs, incremental revenue