Cobe Company has already manufactured 21,000 units of Product A at a cost of $10
ID: 2529768 • Letter: C
Question
Cobe Company has already manufactured 21,000 units of Product A at a cost of $10 per unit. The 21,000 units can be sold at this stage for $470,000. Alternatively, the units can be further processed at a $230,000 total additional cost and be converted into 5,900 units of Product B and 11,900 units of Product C. Per unit selling price for Product B is $105 and for Product C is $55. 1. Prepare an analysis that shows whether the 21,000 units of Product A should be processed further or not. Sell as is Process Further Sales Relevant costs: Total relevant costs ncome (loss) Incremental net income (or loss) if processed further The company shouldExplanation / Answer
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Sell as is Process further Sale 470000 1274000 (5900*105)+(11900*55) Relevant Cost: Cost to process further 230000 Total Relevant Cost 0 230000 Income(Loss) 470000 1044000 Increment net income (loss) if processed further 1044000-470000 574000 Incremental Income The company should Process further.