Exercise 10-8 Sell or process further LO A1 Cobe Company has already manufacture

Question

Exercise 10-8 Sell or process further LO A1 Cobe Company has already manufactured 22,000 units of Product A at a cost of $15 per unit. The 22,000 units can be sold at this stage for $490,000. Alternatively, the units can be further processed at a $290,000 total additional cost and be converted into 5,000 units of Product B and 11,200 units of Product C. Per unit selling price for Product B is $110 and for Product C is $53. 1. Prepare an analysis that shows whether the 22,000 units of Product A should be processed further or not. Sell as is Process Further Sales Relevant costs: Costs to process further $ 490,000 Total relevant costs Income (loss) Incremental net income (or loss) if processed Incremental income further The company should process further

Explanation / Answer

Sell as is Process Further Sales 490000 1143600 Relevant costs Costs to process further 2,90,000 Total relevant costs 290000 Income (loss) 490000 853600 Incremental net income (or loss) if processed further 363600 Incremental income The company should process further

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