Question

5

Product A is produced for $3.40 per pound. Product A can be sold without additional processing for $4.28 per pound or processed further into Product B at an additional cost of $0.42 per pound. Product B can be sold for $4.34 per pound.

Prepare a differential analysis dated November 15 on whether to sell A (Alternative 1) or process further into B (Alternative 2). If required, round your answers to the nearest whole dollar. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Sell Product A (Alt. 1) or Process Further into Product B (Alt. 2)
November 15
	Sell Product A (Alternative 1)	Process Further into Product B (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues, per unit	$	$	$
Costs, per unit
Income (Loss), per unit	$	$	$

Should Product A be sold (Alternative 1) or processed further into Product B (Alternative 2)?

Answer 1

	Sell	Process further	Difference
Revenues	4.28	4.34	0.06
Costs	-3.40	-3.82	-0.42
Income (Loss)	0.88	0.52	-0.36

Product A should be sold

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