Marsden manufactures a cat food product called Special Export. Marsden current h

Question

Marsden manufactures a cat food product called Special Export. Marsden current has 10,000 bags of Special Export on hand. The variable production costs per bag are $1.80 and total fixed costs are $10,000. The cat food can be sold as it is for $9 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively. The net advantage (incremental income) of processing Special Export further into Prime and Feline Surprise would be $98,000 $96,000 $8,000 $6,000 $2,000 A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next five years. The $19,000 cost is an example of a(n): Sunk cost. Fixed cost. Incremental cost. Uncontrollable cost. Opportunity cost. Materials that are used in support of the production process but that do not become a part of the product and are not clearly identified with units or batches of product are called: Secondary materials. General materials. Direct materials. Indirect materials. Materials inventory.

Explanation / Answer

Answer 27.

Answer 28. The company is considering a new project which cost $19000. This cost is in addition to the normal cost. So $19000 is an incremental cost

Answer 29. The product which is used as a support in the production process is called secondary material

Particulars Before Processing After Processing Incremental Revenue: 10000*9 90000 Prime cat food: 10000*8 80000 Feline Surprise: 3000*6 18000 Total Revenue 90000 980000 8000 Less: Additional cost 2000 Net Advantage 6000

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