Question

kobe company has manufactured 200 partially finished cabinets at a cost of $112,000. these can be sold as is for $134,400. instead, the cabinets can be stained and fitted with hardware to make finished cabinets. further processing costs would be $27,000, and the finished cabinets could be sold for $179,200. if kobe company processes the cabinets further, incremental income is:

Answer 1

The incremental income from selling the partially finished cabinets without further processing is $22,400, while the incremental income from processing the cabinets further is $152,200.

Step-by-step explanation:

To calculate the incremental income, we subtract the cost of manufacturing the partially finished cabinets from the revenue generated by selling the finished cabinets.

The cost of manufacturing the partially finished cabinets is $112,000, and the revenue generated by selling them is $134,400. Therefore, the incremental income from selling the partially finished cabinets without further processing is $134,400 - $112,000 = $22,400.

However, if the cabinets are processed further, the incremental income is calculated by subtracting the additional processing cost of $27,000 from the revenue generated by selling the finished cabinets, which is $179,200. Therefore, the incremental income from processing the cabinets further is $179,200 - $27,000 = $152,200.

Answer 2

The incremental income for Kobe Company if they process the partially finished cabinets further is $17,800.

Step-by-step explanation:

The incremental income for Kobe Company if they process the partially finished cabinets further can be calculated by subtracting the total costs of the additional processing from the additional revenue generated.

The total costs of the additional processing would be $27,000, and the additional revenue generated would be the difference between the selling price of the finished cabinets ($179,200) and the selling price of the partially finished cabinets ($134,400).

Therefore, the incremental income would be $179,200 - $134,400 - $27,000 = $17,800.