Conditional Format as Cell Font 13 or Sabon I a batch of 2,000 bars of soap for

Question

Conditional Format as Cell Font 13 or Sabon I a batch of 2,000 bars of soap for $200, and each bar of soap can be sold for $0.50. Sabon can further process the bars of soap into body soap, perfumed soap and cleansers. special formulations. This process will cost $1,000 per batch and produce 500 bottles of body wash with a price point of $3.50. process includes direct labor and results in waste. Each batch results in only 1,50o cleanser bars and has the following costs: 1) What are the costs that Sabon incurred up to split-off point? 4) Should Sabon process or not process further the body soap? 5) What is the net 6) Should Sabon process or not process further the high-end soap? 7) What is the net 8) Should Sabon process or not process further the cleansers? 9) Which product would you recommend Sabon to manufacture?

Explanation / Answer

1. costs that sabon incurred upto split off point= 200

2. Incremental revenue for bar of soap= 0.5 *2000= 1000

3. Net realisable value of body soap:

4. Yes, as the incremental revenue for the bars of soap is lesser than net realisable value, it should further process.

5. Net realisable value of perfumed soap:

6. it should further process, as net realisable value is more than incremental revenue of bars of soap

7.

9. Cleansers

as cleansers are providing highest net realisable value, it should be manufactured

per unit total Units 2000 Sales revenue 3.5 7000 Less: further processing costs 1000*4 4000 Net realisable value 3000

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