Question

Walters manufactures a specialty food product that can currently be sold for $23.00 per unit and has 21,000 units on hand. Alternatively, it can be further processed at a cost of $13,000 and converted into 13,000 units of Deluxe and 7,000 units of Super. The selling price of Deluxe and Super are $31.00 and $21.00, respectively. The incremental net income of processing further would be:

Answer 1

Net incremental income will be $67000

Step-by-step explanation:

We have given before the further processing number of units sold = 21000 units

Cost of per unit = $23

So total sales revenue before the further processing = $23×21000 = $483000

After processing number of units sold are 13000 units of deluxe and 7000 units of super

And cost of deluxe is $31 per unit and cost of super is $21 per unit

So total sales revenue after further processing = 13000× $31 +7000×$21 = $550000

So incremental net income after further processing = $550000 - $483000 = $67000