Cobe Company has already manufactured 25,000 units of Product A at a cost of $25

Question

Cobe Company has already manufactured 25,000 units of Product A at a cost of $25 per unit. The 25,000 units can be sold at this stage for $420,000. Alternatively, the units can be further processed at a $250,000 total additional cost and be converted into 5,600 units of Product B and 11,400 units of Product C. Per unit selling price for Product B is $106 and for Product C is $55. 1. Prepare an analysis that shows whether the 25,000 units of Product A should be processed further or not. Sell as is Process Further Sales Relevant costs: Total relevant costs Income (loss) Incremental net income (or loss) if processed The company should

Explanation / Answer

Sell as is Process Further Sales 420000 1220600 Relevant costs Costs to process further 2,50,000 Total relevant costs 250000 Income (loss) 420000 970600 Incremental net income (or loss) if processed further 550600 Incremental income The company should process further

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