Product T is produced for $5.90 per pound. Product T can be sold without additio

Question

Product T is produced for $5.90 per pound. Product T can be sold without additional processing for $7.10 per pound, or processed further into Product U at an additional cost of $0.74 per pound. Product U can be sold for $8.00 per pound. Required: 1. Prepare a differential analysis dated August 2 on whether to sell Product T (Alternative 1) or process further into Product U (Alternative 2). Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required. 2. Should Product T be sold (Alternative 1) or processed further into Product U (Alternative 2)?

Explanation / Answer

Statement showing computations Particulars Sold as it is   Further processed Differential Sales price per unit                   7.10                                  8.00                                      0.90 Costs of producing:                                           -   Cost of producing T                   5.90                                  5.90                                           -   Cost of Further processing                       -                                    0.74                                      0.74 Total costs                   5.90                                  6.64                                      0.74 Income from selling                   1.20                                  1.36                                      0.16 Thus Product T should be further processed into product U

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