Question

apple valley orchards sells qpple for $15.00 per bushel.the company has considered processing some of its apple butter. eac bushel of apple will yield two dozen jars of apple butter, which can be sold for $1.50 per jar. the additional cost to process the apple into apple butter is $.75 per jar.

use differential analysis to determine whether apple valley orchads should make the apple butter

Answer 1

Apple valley orchards Differential Analysis (b) - (a) (a) (b) Without Increase If Further (Decrease) in Further Processed Processing income Number of units sold [Without further processing = 1 bushel; If further processed = 2 dozen jars = 24 jars] 1 24 $15.00 $1.50 Selling price per unit $21 [Without further processing 1 x $15.00 $15; If further processed 24 x $1.50 $36] -$18 [If further processed 24 jars x $0.75 $18] Total sale value $15 $36 -$18 $18 Less: Further processing cost $0 Increase (Decrease) in net income $15 $3 CONCLUSION: As income is increased by $3 if further processed, Apple valley orchads should make the apple butter instead of selling apples as bushels.