Maxim manufactures a hamster food product called Green Health. Maxim currently h
ID: 2590164 • Letter: M
Question
Maxim manufactures a hamster food product called Green Health. Maxim currently has 15,500 bags of Green Health on hand. The variable production costs per bag are $2.90 and total fixed costs are $21,000. The hamster food can be sold as it is for $10.00 per bag or be processed further into Premium Green and Green Deluxe at an additional cost. The additional processing will yield 15,500 bags of Premium Green and 4,100 bags of Green Deluxe, which can be sold for $9 and $7 per bag, respectively. The incremental revenue of processing Green Health further into Premium Green and Green Deluxe would be:
$163,200.
$13,200.
$8,200.
$5,000.
$168,200.
Explanation / Answer
Revenue if processed further
Premium (15500*9)
139500
Deluxe (4100*7)
28700
Total revenue if processed
168200
Revenue if sold as green health
(15500*10)
-155000
Incremental revenue
13200
Cost to process further
0
Incremental income to process further
13200
Ans: 13200
Revenue if processed further
Premium (15500*9)
139500
Deluxe (4100*7)
28700
Total revenue if processed
168200
Revenue if sold as green health
(15500*10)
-155000
Incremental revenue
13200
Cost to process further
0
Incremental income to process further
13200