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Maxim manufactures a hamster food product called Green Health. Maxim currently has 11,50o bags of Green Health on hand. The variable production costs per bag are $2.10 and total fixed costs are $13,000. The hamster food can be sold as it is for $10.00 per bag or be processed further into Premium Green and Green Deluxe at an additional cost. The additional processing will yield 11.500 bags of Premium Green and 3,300 bags of Green Deluxe, which can be sold for $9 and $7 per bag. respectively. The incremental revenue of processing Green Health further into Premium Green and Green Deluxe would be Multiple Choice $121,600 $11,600 $6600 O s5.000 $126,600
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Answer #1

Ans.

Revenue means the total sales value which is received or can be received by selling the products.

Here in case:

  1. Revenue will be on 11500 bags of green health- 11500*10/bags= $115,000
  2. Revenue will be:
  • on 11500 of premium green bags @ $9/bag= $103,500
  • on 3300 of green deluxe bags @ $7/bag= $23,100
    • Total $126,600

Therefore, Incremental Revenue from Case 2 and Case 1 is 126600-115000

= $11,600 ie option b

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