Cobe Company has already manufactured 28,000 units of Product A at a cost of $28 per unit. The 28,000 units can be sold at this stage for $700,000. Alternatively, the units can be further processed at a $420,000 total additional cost and be converted into 5,600 units of Product B and 11,200 units of Product C per unit selling price for Product B is $105 and for Product C is $70.

Prepare an analysis that shows whether the 28,000 units of Product A should be processed further or not.

Sell as is Process Further

sales

Relevant Cost

Total relevant cost

Income (loss)

Incremental net income or loss

The company should

Question

Jesse Snow

Business

30 March, 03:41

Cobe Company has already manufactured 28,000 units of Product A at a cost of $28 per unit. The 28,000 units can be sold at this stage for $700,000. Alternatively, the units can be further processed at a $420,000 total additional cost and be converted into 5,600 units of Product B and 11,200 units of Product C per unit selling price for Product B is $105 and for Product C is $70.

Prepare an analysis that shows whether the 28,000 units of Product A should be processed further or not.

Sell as is Process Further

sales

Relevant Cost

Total relevant cost

Income (loss)

Incremental net income or loss

The company should

+4

Answers (1)

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Evan · Answer 1

Cobe Company

Analysis statement

sell as pocess further

Sales:

product B (5,600*$105) $588,000

product C (11,200*$70) 784,000

1,372,000

Relevant Cost:

manufacturing cost (28,000*28) 784,000

Additional cost 420,000 1,204,000

Income 168,000

The incremental net income is $168,000.

Therefore, the company should process further before selling the product