Austin Wool Products purchases raw wool and processes it into yarn. The spindles

Question

Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn. Current cost and revenue data for the spindles of yarn and for the afghans are as follows:

Each month 4,900 spindles of yarn are produced that can either be sold outright or processed into afghans.

If Austin chooses to produce 4,900 afghans each month, the change in the monthly net operating income as compared to selling 4,900 spindles of yarn is:

Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn. Current cost and revenue data for the spindles of yarn and for the afghans are as follows:

Explanation / Answer

$-98,000 decrease

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