Question

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

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

Step-by-step explanation: