Cobe Company has already manufactured 17,000 units of Product A at a cost of $10 per unit. The 17,000 units can be sold at this stage for $470,000. Alternatively, the units can be further processed at a $280,000 total additional cost and be converted into 5,200 units of Product B and 11,300 units of Product C. Per unit selling price for Product B is $104 and for Product C is $52. 1. Prepare an analysis that shows whether the 17,000 units of Product A should be processed further or not?

Question

Ali Crawford

Business

2 December, 19:25

Cobe Company has already manufactured 17,000 units of Product A at a cost of $10 per unit. The 17,000 units can be sold at this stage for $470,000. Alternatively, the units can be further processed at a $280,000 total additional cost and be converted into 5,200 units of Product B and 11,300 units of Product C. Per unit selling price for Product B is $104 and for Product C is $52. 1. Prepare an analysis that shows whether the 17,000 units of Product A should be processed further or not?

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Elias · Answer 1

Company should be processed further of product A.

Explanation:

According to the scenario, computation of the given data are as follows:-

Particular Sales Amount Further Process

Sales $4,70,000 $11,28,400

For Further process additional cost $2,80,000

Income/Loss $4,70,000 $8,48,400

Further Processed Total Additional Sales = Sale Units of Product B * Price Per Unit of Product B + Sale Units of Product C * Price Per Unit of Product C

= (5200 * $104) + (11,300 * $52)

= $540,800 + $587,600 = $1,128,400

If Processed Further Incremental Net Income = Income - Sales

= $848,400 - $470,000

= $378,400.

According to the Analysis, Company should be processed further of product A.