Holmes Company produces a product that can either be sold as is or processed fur

Question

Holmes Company produces a product that can either be sold as is or processed further. Holmes has already spent $88,000 to produce 2,300 units that can be sold now for $93,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $270 per unit. If Holmes processes further, the units can be sold for $395 each. Compute the incremental income if Holmes processes further. Sell as is Process Further Incremental Amount Sales Additional processing costs Income (loss) The company should:

Explanation / Answer

Company should accept the order. so they can earn an additional income of $194,000

Sell as is Process further Incremental amount Sales $    93,500 $                908,500 $                           815,000 Additional processing cost $               - $                621,000 $                        (621,000) Incoem (Loss) $    93,500 $                287,500 $                           194,000

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