Question

Cobe Company has already manufactured 28,000 units of Product A at a cost of $28 per unit. The 28,000 units can be sold at this stage for $700,000. Alternatively, the units can be further processed at a $420,000 total additional cost and be converted into 5,600 units of Product B and 11,200 units of Product C. Per unit selling price for Product B is $105 and for Product C is $70.

Answer 1

The preparation is presented below:

Step-by-step explanation:

Particulars Sell process further

sales $700,000 $1,372,000

Relevant cost

Process further cost $0 $420,000

Less: Total relevant cost $0 $420,000

Income $700,000 $952,000

Incremental income $252,000

The $1,372,000 is come from

= 5,600 units × $105 + 11,200 units × $70

= $588,000 + $784,000

= $1,372,000

Therefore, the company should process further