Question

Eddy Company 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 Eddy Company would sell it for $135. The cost to assemble the product is estimated at $27 per unit and Eddy Company believes the market would support a price of $174 on the assembled unit. What is the correct decision using the sell or process further decision rule?

Answer 1

The correct decision is using process further decision rule.

Step-by-step explanation:

Incremental profit /(loss)from further processing

= Sale value after assembling - sale value of unassembled unit - further processing cost

= 174 - 135 - 27

= $ 12

Therefore, The correct decision is using process further decision rule.