Exercise 23-8 Sell or process further LO A1 Cobe Company has already manufacture

Question

Exercise 23-8 Sell or process further LO A1

Cobe Company has already manufactured 22,000 units of Product A at a cost of $20 per unit. The 22,000 units can be sold at this stage for $420,000. Alternatively, the units can be further processed at a $250,000 total additional cost and be converted into 5,800 units of Product B and 11,900 units of Product C. Per unit selling price for Product B is $105 and for Product C is $54.

1. Prepare an analysis that shows whether the 22,000 units of Product A should be processed further or not.

Exercise 23-8 Sell or process further LO A1

Cobe Company has already manufactured 22,000 units of Product A at a cost of $20 per unit. The 22,000 units can be sold at this stage for $420,000. Alternatively, the units can be further processed at a $250,000 total additional cost and be converted into 5,800 units of Product B and 11,900 units of Product C. Per unit selling price for Product B is $105 and for Product C is $54.

1. Prepare an analysis that shows whether the 22,000 units of Product A should be processed further or not.

Sell as is Process Further Sales Relevant costs: Total relevant costs Income (loss) Incremental net income (or loss) if processed further The company should

Explanation / Answer

Sell as is Process Further Sales $420,000 $1,251,600 Relevant costs Costs to process further 250,000 Total relevant costs 250000 Income (loss) $420,000 $1,001,600 Incremental net income (or loss) if processed further $581,600 Incremental income The company should process further

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