Question

Hickman Manufacturing produces Product A in batches of 4,000 gallons at $.90 per gallon. Product A can be sold without further processing for $1.20 per gallon. Product A can be processed further to yield Product B, which can be sold for $1.85 per gallon. Product B requires additional processing costs at $1,650 per batch.

Required:
(A) Compute the incremental income or loss from further production of one batch of Product B.

Answer 1

$0.24

Step-by-step explanation:

Hickman Manufacturing

A B

SP: $1.20 $1.85

CC:$0.90 $0.90

Add. Costs: $0.41 ($1650/4000 gal)

$0.30 $0.54

Hence:

0.54 – 0.30 = $0.24 change in NOI/unit

The incremental income or loss from further production of one batch of Product B. Is $0.24