Question

Cobe Company has already manufactured 18,000 units of Product A at a cost of $15 per unit. The 18,000 units can be sold at this stage for $410,000. Alternatively, the units can be further processed at a $290,000 total additional cost and be converted into 5,900 units of Product B and 11,900 units of Product C. Per unit selling price for Product B is $102 and for Product C is $60. 1. Prepare an analysis that shows whether the 18,000 units of Product A should be processed further or not.

Answer 1

Step-by-step explanation:

Workings

Product A

Selling price 410,000

Income 1 410,000

Further processing

Incremental cost 290,000

Product B 5900 102 601,800

Product C 11,900 60 714,000

Total revenue 1,315,800

Incremental cost 290,000

Income 2 1,025,800

Income on further process , that is if an additional cost of 290,000 is spent on the initial cost that generated the sales of 410,000 = 1,025,800

Incremental income on further processing =1,025,800-410,000 = 615,800

Therefore , it is advised that it should be processed further.