Ahngram Corp. has 1,000 carton of oranges that cost $10 per carton in direct costs and $16.50 per carton in indirect costs and sold for $30 per carton. The oranges can be processed further into orange juice at an additional cost of $12.50 and sold at a price of $46. The incremental income (loss) from processing the oranges into orange juice would be:

Multiple Choice

A. $30,500.

B. $22,500.

C. $30,500

D. $33,500.

E. $23,500.

The correct answer is D that is $33,500

Explanation:

The total cost for the oranges = Direct cost + Indirect cost

= (Number of carton * Rate per carton) + (Number of carton * Rate per carton)

= (1,000 * $10) + (1,000 * $16.50)

= $10,000 + $16,500

= $26,500

Total Revenue = Number of carton * Selling price

= 1,000 * $30

= $30,000

Profit from oranges = Revenue - Cost

= $30,000 - $26,500

= $3,500

Profit or loss from from processing into the orange juice is computed:

Total Cost = Number of carton * Price

= 1,000 * $12.50

= $12,500

Revenue = Number of carton * Selling Price

=1,000 * $46

= $46,000

Profit or loss = Revenue - Cost

= $46,000 - $12,500

= $33,500

Therefore, Corporation has a profit of 33,500.