Answer:
It is more profitable to continue processing and sell the units for $23. Income will increase by $27,500.
Explanation:
Giving the following information:
7,400 units of product X15 are produced from each ton.
The units can either be sold at the split-off point for $18 each or processed further at a total cost of $9,500 and then sold for $23 each.
We will not consider the firsts costs incurred because they won't change the decision.
Sell at the split-off:
Effect on income= 18*7,400= $133,200
Continue processing:
Effect on income= 7,400*23 - 9,500= $160,700
It is more profitable to continue processing and sell the units for $23. Income will increase by $27,500.
