If Kobe Company processes the cabinets further, incremental income is <u>$16,000</u>.
<h3>What is incremental income?</h3>
The incremental income represents the additional gain that Kobe Company obtains from further processing of the partially finished cabinets.
<h3>Data and Calculations:</h3>
Cost of 200 partially finished cabinets = $100,000
Sales revenue from the partially finished cabinets = $120,000
Income without further processing = $20,000 ($120,000 - $100,000)
Cost of further processing = $24,000
Sales revenue from further processing = $160,000
Total income after further processing = $36,000 ($160,000 - $100,000 - $24,000)
Incremental income = $16,000 ($36,000 - $20,000)
Thus, if Kobe Company processes the cabinets further, incremental income is <u>$16,000</u>.
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