Exercise 10-8 Sell or process further LO A1 e Company has already manufactured 1

Question

Exercise 10-8 Sell or process further LO A1 e Company has already manufactured 17000 units of Product A at a cost of $20 per unit The 17000 units can be sold at this stage for $400,000. Alternatively, the units can be further processed at a $260000 total additional cost and be converted into 5,200 units of units of Product C Per unit selling price for Product B is $106 and for Product C is $54 1. Prepare an analysis that shows whether the 17,000 units of Product A should be processed further or not Sell as is Process Further Sales Relevant costs Total relevant costs Income (loss incremental net income ior loss) fr processed further The company should

Explanation / Answer

Sales after further (5200*106)+(11800*54)

Sell as is Process Further Sales        4,00,000 11,88,400 Relevant costs Cost to Manufacture Product A        3,40,000           3,40,000 Additional Cost to Manufacture Product B and Product C           2,60,000 Total relevant costs        3,40,000           6,00,000 Income (loss)            60,000           5,88,400 Incremental net income or loss processed further 528.400 Income The Company should Process Further

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