Question

A company manufactures three products, a, b, and c from a single raw material input. product c can be sold at the split-off point for total revenues of $60,000 or it can be processed further at a total cost of $16,000 and then sold for $78,000. product

c.select one:


a. should be sold at the split-off point, rather than processed further.


b. would increase the company's overall net income by $18,000 if processed further and then sold.


c. would increase the company's overall net income by $78,000 if processed further and then sold.


d. would increase the company's overall net income by $2000 if processed further and then sold.

Answer 1

d. would increase the company's overall net income by $2000 if processed further and then sold.

Step-by-step explanation:

Product C can be sold at split off point at $60,000 or it can also be further processed at a cost of $16,000 and then sold for $78,000.

So if the product is processed further at a cost of $16,000, then the total cost price will be $60,000 + $16,000= $76,000.

Selling price= $78,000

Net income= $78,000-$76,000= $2,000

Therefore,if the product C is processed further and sold, then it has increased the company's overall net income by $2,000.