Question

Exercise 23-8 Sell or process further LO A1 Cobe Company has already manufactured 20,000 units of Product A at a cost of $30 per unit. The 20,000 units can be sold at this stage for $420,000. Alternatively, the units can be further processed at a $210,000 total additional cost and be converted into 5,500 units of Product B and 11,300 units of Product C. Per unit selling price for Product B is $102 and for Product C is $59. 1. Prepare an analysis that shows whether the 20,000 units of Product A should be processed further or not Process Further Sales Relevant costs LT 11 Total relevant costs Income (loss) Incremental net income (or loss) if processed further The company should

Answer 1

Ans:

	Sell as It is	Process Further
Sales	420,000.00	1,227,700.00
Relevant Cost
Cost to Process Further		210,000.00
Total Relevant Costs		210,000.00
Income (loss )	420,000.00	1,017,700.00
Incremental net income (or loss) if processed further		597,700.00	Incremental income
The company should		process further

Note:

1,227,700.00=5500*102+ 11300*59