Question

Holmes Company produces a product that can be either sold as is or processed further. Holmes has already spent $96,000 to produce 1,375 units that can be sold now for $89,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $290 per unit. If Holmes processes further, the units can be sold for $440 each. Should Holmes sell the product now or process it further

Answer 1

Yes

Step-by-step explanation:

The computation is shown below:

Particulars Sales As Is Process further Incremental Accounting

Sales $89,500 $605,000 $515,500

(1,375 units × $440)

Less:

Additional Process costs $398,750 $398,750

(1,375 units × $290)

Total $89,500 $206,250 $116,750

Based on the incremental income, Holmes should process it further.