Question

How do I calculate the income (loss)?

Cobe Company has already manufactured 22,000 units of Product A at a cost of $20 per unit. The 22,000 units can be sold at this stage for $480,000. Alternatively, the units can be further processed at a $210,000 total additional cost and be converted into 5,900 units of Product B and 11,300 units of Product C. Per unit selling price for Product B is $109 and for Product C is $56. 1. Prepare an analysis that shows whether the 22,000 units of Product A should be processed further or not? & Answer is complete but not entirely correct. Sell as is 480,000 Process Further 1,275,900 Sales $ $ Relevant costs: Costs to process further (210,000) Total relevant costs Income (loss) $ 40,000 $ (625,900) Incremental net income (or loss) if processed further $ 585,900 Incremental income ♡ The company should process further

Answer 1

Answer-

INCREMENTAL ANALYSIS
PARTICULARS	SELL AS IS	PROCESS FURTHER	INCREMENTAL INCOME
	$	$	$
Sales	480000	(5900 units*$109 per unit)+(11300 units*$56 per unit) =1275900	795900
Less- Relevant costs
Cost to process further	0	210000	210000
Incremental Income	480000	1065900	585900
The company should		process further