Question

Process or Sell Product A is produced for $3.32 per pound. Product A can be sold without additional processing for $4.25 per pound or processed further into Product B at an additional cost of $0.4 per pound. Product B can be sold for $4.56 per pound. Prepare a differential analysis dated November 15 on whether to sell A (Alternative 1) or process further into B (Alternative 2). If required, round your answers to the nearest whole dollar. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Answer 1

Answer and Explanation:

The preparation of the differential analysis is presented below;

Particulars Sell product A Product B further Difference

Revenue

per pound $4.25 $4.56 $0.31

Cost per pound $3.32 $3.72 $0.4

($3.32 + $0.4)

Income cost

per pound $0.93 $0.84 -$0.09

So it would be sell off as the firm would be facing a loss of $0.09 per pound