Question

Exercise 10-3 Sell or process further LO P2 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. 1. Prepare an analysis that shows whether the 28,000 units of Product A should be processed further or not?

Answer 1

The company should process the units further.

Step-by-step explanation:

Base on the scenario been described in the question, we can be able to use the method to prepare an analysis that shows whether the 28,000 units of Product A should be processed further or not.

Sell as is Process

further

Sale as is (28,000 units x $25.00) $700,000

Process further (5,600 units x $105) + (11,200 x $70) $1,372,000

Cost to process further (420,000)

Incremental income (loss) $700,000 $952,000

The company should process the units further