Cobe Company has already manufactured 18,000 units of Product A at a cost of $30
ID: 2526827 • Letter: C
Question
Cobe Company has already manufactured 18,000 units of Product A at a cost of $30 per unit The 18,000 units can be sold at this stage for $450,000. Alternatively, the units can be further processed at a $280,000 total additional cost and be converted into 5,700 units of Product B and 11,200 units of Product C. Per unit selling price for Product B is $107 and for Product C is $53. 1. Prepare an analysis that shows whether the 18,000 units of Product A should be processed further or not. Sell as is Process Further 450,000 1,203,500 Sales Relevant costs: Costs to process further Total relevant costs Income (loss) Incremental net income (or loss) if processerd further The company shouldExplanation / Answer
Sell as is Process Further Sales $450,000 $1,203,500 Relevant costs Costs to process further 280,000 Total relevant costs 280000 Income (loss) $450,000 $923,500 Incremental net income (or loss) if processed further $473,500 Incremental income The company should process further 2 Sale as Scrap Rework Sales of scrap units $40,000 Sales of reworked units $124,800 Cost to rework units ($75,200) Opportunity cost of not making new units -40,000 Incremental income (loss) $40,000 9600 The company should: sell as is