Question

Ahngram Corp. has 1,000 carton of oranges that cost $44 per carton in direct costs and $25.00 per carton in indirect costs and sold for $64 per carton. The oranges can be processed further into orange juice at an additional cost of $21.00 and sold at a price of $114. The incremental income (loss) from processing the oranges into orange juice would be:

Answer 1

Answer:

It is more profitable to continue processing.

Explanation:

Giving the following information:

Ahngram Corp. has 1,000 cartons of oranges that cost $44 per carton in direct costs and $25.00 per carton in indirect costs and sold for $64 per carton. The oranges can be processed further into orange juice at an additional cost of $21.00 and sold for $114.

First, we need to calculate the income before processing and then the income after processing:

Before processing:

Income= 1,000*(64 - 44 - 25)= -$5,000

After processing:

Income= 1,000*(114 - 69 - 21)= $24,000

It is more profitable to continue processing.