Question

Walters manufactures a specialty food product that can currently be sold for $21.90 per unit and has 19,900 units on hand. Alternatively, it can be further processed at a cost of $11,900 and converted into 11,900 units of Deluxe and 5,900 units of Super. The selling price of Deluxe and Super are $31.10 and $19.90, respectively. The incremental income of processing further would be:_______.
a. $39,790.
b· $51,690.
c· $17,900.
d· $43,900.
e· $11,900.

Answer 1

Answer:

a. $39,790.

Explanation:

The computation of the incremental income of processing further is shown below:

Sales - Deluxe - 11,900 Units × $31.10            $370,090  

Sales - Super - 5,900 Units × $19.90            $117,410  

Total Sales                                                      $487,500  (a)

Further Processing Costs                              $11,900  

Sale Price of speciality Food                         $435,810        

19,900 Units × $21.90

Total                                                                $447,710  (b)

Net Incremental Income                               $39,790 (a - b)

Hence, the correct option is a.