Question

Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $8.55 per pound to produce. What is the differential revenue of producing Product D?

Answer 1

Answer:

$18

Explanation:

In this question, we are asked to calculate the differential revenue of producing product D

The term differential revenue can be defined as the sales difference that results from taking two different action courses. It looks at two different responses to a particular situation.

Mathematically;

differential cost of producing Product D

= Cost of Product (J + D) - Cost of Product J

($15.75 + $8.55) - $15.75 = $8.55 is the additional cost of producing Product D

Diffrential revenue for Product D

Revenue (D) - Revenue (J)

$38 - $20 = $18