Answer:
product A should be processed further.
Explanation:
Given;
Manufacturing cost = $20 per unit
Number of units manufactured = 23,000
Selling cost of all units = $460,000
Further processing cost = $240,000
Number of units of product B produced = 5,000
Number of units of product C produced = 12,000
Per unit selling price of product B = $101
Per unit selling price of product C = $56
Total relevant cost for Product B and C = $240,000
Total revenue from selling Product B and C
= ( $101 × 5,000 ) + ( $56 × 12,000 )
= $505,000 + $672,000
= $1,177,000
Total income from Product B and C
= Total revenue from selling Product B and C - Relevant cost
= $1,177,000 - $240,000
= $937,000
The net incremental income
= Total income from Product B and C - income from sales without processing
= $937,000 - $460,000
= $477,000
Since, the net incremental income is positive the product A should be processed further.
