Designer Dollhouses manufactures dollhouse kits that are meant to be assembled by customers. Each kit sells for $60 and has $12 in fixed production costs and $10 in variable production costs. Rather tha selling these kits, the firm is thinking about selling the dollhouses fully assembled for $95 each. The variable costs for assembling one dollhouse are expected to be $14. Given these figures, which of the following statements is accurate? A Designer should sell dollhouse kits rather than assembled dollhouses because its net income per unit would be $8 higher. B Designer should sell assembled dollhouses rather than dollhouse kits because its net income per unit would be $21 higher. Designer should sell assembled dollhouses rather than dollhouse kits because its net income per unit would be $43 higher. Designer should sell dollhouse kits rather than assembled dollhouses because its net income per unit would be $14 higher.

Question

Business

Rosales

15 November, 02:52

Designer Dollhouses manufactures dollhouse kits that are meant to be assembled by customers. Each kit sells for $60 and has $12 in fixed production costs and $10 in variable production costs. Rather tha selling these kits, the firm is thinking about selling the dollhouses fully assembled for $95 each. The variable costs for assembling one dollhouse are expected to be $14. Given these figures, which of the following statements is accurate? A Designer should sell dollhouse kits rather than assembled dollhouses because its net income per unit would be $8 higher. B Designer should sell assembled dollhouses rather than dollhouse kits because its net income per unit would be $21 higher. Designer should sell assembled dollhouses rather than dollhouse kits because its net income per unit would be $43 higher. Designer should sell dollhouse kits rather than assembled dollhouses because its net income per unit would be $14 higher.

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Answers (1)

Know the Answer?

Rohan Potts · Answer 1

The correct answer is B.

Explanation:

Giving the following information:

Designer Dollhouses manufactures dollhouse kits that are meant to be assembled by customers. Each kit sells for $60 and has $12 in fixed production costs and $10 in variable production costs. Rather tha selling these kits, the firm is thinking about selling the dollhouses fully assembled for $95 each. The variable costs for assembling one dollhouse are expected to be $14.

Contribution margin Kits:

CM = selling price - unitary variable costs

CM = 60 - 12 = 48

CM assembled:

CM = 95 - 12 - 14 = 69

Effect in Net income = 69 - 48 = 21