Question 12 (of 15) Holmes Company produces a product that can either be sold as

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Question 12 (of 15) Holmes Company produces a product that can either be sold as is or processed further. Holmes has already spent $78,000 to produce 1,400 units that can be sold now for $93,500 to another manufacturer Alternatively, Holmes can process the units further at an incremental cost of $280 per unit If Holmes processes further, the units can be sold for $410 each. Compute the incremental income if Holmes processes further Sell as is Process Incremen Amount Sales 93,500 S 574,000 392,000 s 15,500 s 182,000 Additional processing costs 78,00 Income (loss) The company should Process Buthe 0 Type here to search isplay P202

Explanation / Answer

Process Further Particulars Sell as is (A) Units Selling Price Amount(B) Increamental Amount(A-B) Sales (A) $             93,500 $         1,400 $                  410 $                 5,74,000 $                                    4,80,500 Less: Already Spent $             78,000 $                     78,000 $                                                 -   Less: Further Process Cost $         1,400 $                  280 $                 3,92,000 $                                    3,92,000 Total Cost(B) $             78,000 $                 4,70,000 $                                    3,92,000 Net Gain $             15,500 $                 1,04,000 $                                        88,500 Answer = The company should process further becasye the there is increamental gain amount = $ 88,500

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