Please provide explanation.
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Homework Answers
| Product | Sales value of splits off (i) | Cost of process further (ii) | Sales value after further processing (iii) | Increase in sales value (iii - i) = (iv) | Incremental gain/loss (iv - ii) |
| AA | 45 | 15 | 55 | 10 | -5 |
| BB | 50 | 20 | 80 | 30 | 10 |
If product AA is processed further, it will provide loss of $5 and if product BB is processed further, it will provide gain of $10.
Hence, product AA should be sold at split off and product BB should be processed further.
Second option is the correct option.
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Please provide explanation.
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