It costs Camp, Inc. $35 per unit to manufacture 1,000 units per month of a product that it can sell for $50 each. Alternatively, Camp could process the units further into a more complex product, which would cost an additional $30 per unit. Camp could sell the more complex product for $75 each. How would processing the product further affect Camp's profit?

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Business

13 October, 09:26

It costs Camp, Inc. $35 per unit to manufacture 1,000 units per month of a product that it can sell for $50 each. Alternatively, Camp could process the units further into a more complex product, which would cost an additional $30 per unit. Camp could sell the more complex product for $75 each. How would processing the product further affect Camp's profit?

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Answers (1)

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Nelson Walsh · Answer 1

The correct answer is decrease by $5,000.

Explanation:

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

First we calculate the profit in the current situation,

So, Profit in current = 1,000 units * ($50 - $35)

= $15,000

If we process further, than the profit will be as follows:

Profit after processing = 1,000 units * ($75 - ($35 + $30))

= 1,000 units * ($75 - $65)

= $10,000

So, Change in profit = $10,000 - $15,000 = - $5,000 (negative shows decrease)

So, Further processing will decrease profit by $5,000.