Question

Exercise 23-8 Sell or process further LO A1 Cobe Company has already manufactured 15,000 units of Product A at a cost of $30 per unit. The 15,000 units can be sold at this stage for $450,000. Alternatively, the units can be further processed at a $210,000 total additional cost and be converted into 5,800 units of Product B and 11,900 units of Product C. Per unit selling price for Product B is $107 and for Product C is $55. 1. Prepare an analysis that shows whether the 15,000 units of Product A should be processed further or not.

Answer 1

Answer:

Yes

Explanation:

In this question, we have to compare the cost so that the net income or net loss would be calculated.

                                         Sales              Process Further Cost

Sales                                $450,000       $1,275,100

Less: Processing cost                            $210,000

Net income                    $450,000        $1,065,100

where,

Sales of further processing cost would be

= 5,800 units × $107 + 11,900 units × $55

= $620,600 + $654,500

= $1,275,100

Since, net income is increased by $615,100. So, It would be process further