Question

Holmes Company produces a product that can be either sold as is or processed further. Holmes has already spent $68,000 to produce 2,150 units that can be sold now for $89,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $250 per unit. If Holmes processes further, the units can be sold for $435 each. Compute the incremental income if Holmes processes further.

Answer 1

$30,000

Step-by-step explanation:

See solution below.

Sells as it is

Sales $89,500

Additional processing cost ($68,000)

Net profit or loss = $39,500

To process further

Sales (2,150 units × $435) $935,250

Additional processing cost

$68,000 + (2,150 units × $250) ($537,568)

Net profit loss $397,682