Question

Holmes Company produces a product that can be either sold as is or processed further. Holmes has already spent $96,000 to produce 1,375 units that can be sold now for $89,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $290 per unit. If Holmes processes further, the units can be sold for $440 each. Should Holmes sell the product now or process it further

Answer 1

Answer:

Yes

Explanation:

The computation is shown below:

Particulars         Sales As Is   Process further     Incremental Accounting

Sales            $89,500       $605,000               $515,500

                                             (1,375 units × $440)

Less:

Additional Process costs $398,750                $398,750

                                          (1,375 units × $290)

Total           $89,500       $206,250                $116,750

Based on the incremental income, Holmes should process it further.