Question

A company has a process that results in 36000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $241200 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?

Answer 1

Answer:

Sell now, the company will be better off by $25,200

Explanation:

The effect of the action of shown below:-

Profits if sold now = Product Pound A × Sold pound

= 36,000 pounds × $8

= $288,000

If processed further Profits

= (36,000 x $14) - $241,200

= $262,800

Selling product A now = Profits if sold now - Further Profits

= $288,000 - $262,800

= $25,200