A company has already incurred a $24,000 cost in partially producing its two pro

Question

A company has already incurred a $24,000 cost in partially producing its two products. Their selling prices when partially and fully processed are shown in the table below with the additional costs necessary to finish their processing. Based on this information, should any products be processed further?

Product Unfinished Selling Price Finished Selling Price Further Processing Costs
A $900 $1,000 $65
B $600 $675 $76

Both product A and product B should be processed further.
Neither product A nor product B should be processed further.
Only product B should be processed further.
Only product A should be processed further.
A processing further decision cannot be made from the available data.

Explanation / Answer

Answer: Only product A should be processed further. Reason: If A is processed futher, they will make (1,000 - 900) - 65 = $35 more But if B is processed further, they will lose (675 - 600) - 76 = -1

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