Question

Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $33 per pound and costs $28 per pound to produce. Product C would sell for $58 per pound and would require an additional cost of $25 per pound to produce. What is the differential cost of producing Product C?

Answer 1

Differential cost is $0

Step-by-step explanation:

A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.

Additional sales revenue = Sales revenue after further processing - sales revenue after split-off point

. A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.

Also note that all cost incurred up to the split-off point are irrelevant to the decision to process further .

$

Sales after split off point (Product C) 58

Sales at the split off point (Product B) 33

Additional sales revenue 25

Further processing cost (25)

Differential cost 0

Differential cost is $0