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E7-9 Rachel Rey recently opened her own basketweaving studio

Price: $1.99

Rachel Rey recently opened her own basketweaving studio. She sells finished baskets
in addition to the raw materials needed by customers to weave baskets of their own.
Rachel has put together a variety of raw material kits, each including materials at various
stages of completion. Unfortunately, owing to space limitations, Rachel is unable to carry
all varieties of kits originally assembled and must choose between two basic packages.
The basic introductory kit includes undyed, uncut reeds (with dye included) for weaving
one basket. This basic package costs Rachel $14 and sells for $30. The second kit,
called Stage 2, includes cut reeds that have already been dyed. With this kit the customer
need only soak the reeds and weave the basket. Rachel is able to produce the second kit
by using the basic materials included in the first kit and adding one hour of her own time,
which she values at $18 per hour. Because she is more efficient at cutting and dying reeds
than her average customer, Rachel is able to make two kits of the dyed reeds, in one hour,
from one kit of undyed reeds. The Stage 2 kit sells for $35.

Determine whether Rachel’s basketweaving shop should carry the basic introductory kit
with undyed and uncut reeds or the Stage 2 kit with reeds already dyed and cut. Prepare
an incremental analysis to support your answer.

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