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9 June, 01:25

Sheffield Corp. is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Sheffield Corp. would sell it for $135. The cost to assemble the product is estimated at $25 per unit and Sheffield Corp. believes the market would support a price of $170 on the assembled unit. What is the correct decision using the sell or process further decision rule?

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  1. 9 June, 01:51
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    The correct decision would be to process further before product is sold

    Explanation:

    Profit if the product is sold un-assembled

    Selling price $135

    cost of un-assembled product ($60)

    Profit on un-assembled product $75

    Profit if the product is further assembled before sale

    Selling price $170

    Cost of un-assembled product ($60)

    Cost of assembling product ($25)

    Profit if the product is assembled $85

    The profit increased by $10 if the product is further assembled before it is sold.

    Hence the best course of action would be to further assemble the product before it is sold
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