Question

Sell or Process Further

Great Lakes Boat Company manufactures sailboat hulls at a cost of $4,200 per unit. The hulls are sold to boat yards for $5,200. The company is evaluating the desirability of adding masts, sails, and rigging to the hulls prior to sale at an additional cost of $1,900. The completed sailboats could then be sold for $6,500 each.

Calculate the net benefit (cost) of processing the boat hulls into sail boats. Assume sales volume will not be affected. Use a negative sign with your answer, if appropriate.

Answer 1

-$600

Step-by-step explanation:

For computing the net benefit or (cost), first, we have to determine the sales price increased which is shown below"

= Sale value of completed sailboats - a sale to boatyards

= $6,500 - $5,200

= $1,300

And, the additional cost is $1,900

So, the net processing cost would be

= $1,300 - $1,900

= -$600

All other information which is given is not relevant. Hence, ignored it