Question

A company has a process that results in 1,300 pounds of Product A that can be sold for $13.00 per pound. An alternative would be to process Product A further at a cost of $13,600 and then sell it for $23.00 per pound. What is the additional profit (loss) that would result from processing the product further?

Answer 1

Answer:

If the company process further the units, income will decrease by $600.

Explanation:

Giving the following information:

A company has a process that results in 1,300 pounds of Product A that can be sold for $13.00 per pound.

An alternative would be to process Product A further for $13,600 and then sell it for $23.00 per pound.

We need to determine the result of further processing the product.

Sell as-is:

Effect on income= 1,300*13= $16,900 increase

Continue processing:

Effect on income= 1,300*23 - 13,600= $16,300

It is more profitable to sell the units before further processing.