Question

1.) It costs Jack, Inc. $35 per unit to manufacture 1,000 units per month of a product that it can sell for $50 each. Alternatively, Jack could process the units further into more complex product, which would cost an additional $30 per unit. Jack could sell the more complex product for $75 each. How would processing the product further affect Jack's profit?

A.) Profit would increase by $5,000

B.) Profit would increase by $25,000

C.) Profit would decrease by $5,000

D.) Profit would decrease by $25,000

2.) True or False:

A special order decision analysis cannot be used to make long-term pricing decisions.

3.) True or False:

A sunk cost is never a relevant cost.

Answer 1

1) colutions 1. Given data, . & costs Jack Inc. $35 per unit to manufacture 1000 units per month of a product that it can sell feo $50 each, Alternatively, Jacly could process the units for the initza more complex product, which would cost an additional & 30 per unit - Jack could sell the more complex product for & 75 each. per unit incremental revenue = 15-50 = $25. Total incremental revenue a 25 x 1000 . .= $ asovo per unit incremental cost = $30 Total incremental cast = 30x1000 =$30000

Pncremental posfit or lows = Poted encremental devenue - Total incremental cost z 25000 - 30000 228.5000 profit would decrease by $ 5000 option 'c' is correct. B) A Special order decision analysis cannot be used to make long-term pricing decisione True (3) A sunt cost is never a relevant cost . True