Process or Sell Product T is produced for $3.36 per pound. Product T can be sold

ID: 2535775 • Letter: P

Question

Process or Sell

Product T is produced for $3.36 per pound. Product T can be sold without additional processing for $4.16 per pound, or processed further into Product U at an additional cost of $0.43 per pound. Product U can be sold for $4.32 per pound.

Prepare a differential analysis dated September 17, on whether to sell T (Alternative 1) or process further into U (Alternative 2). If required, round your answers to the nearest whole dollar.

Should Product T be sold (Alternative 1) or processed further into Product U (Alternative 2)?

Differential Analysis Sell Product T (Alt. 1) or Process Further into Product U (Alt. 2) September 17 Sell Product T (Alternative 1) Process Further into Product U (Alternative 2) Differential Effect on Income (Alternative 2) Revenues, per pound $ $ $ Costs, per pound Income (Loss), per pound $ $ $

Explanation / Answer

Differential Analysis

Sell Product T (Alt. 1) or Process Further into Product U (Alt. 2)

September 17

Sell Product T (Alternative 1)

Process Further into Product U (Alternative 2)

Differential Effect on Income (Alternative 2)

Revenues, per pound

$ 4.16

$ 4.32

$ 0.16

Costs, per pound

$ 3.36

$ 3.79 (3.36+0.43)

$ (0.43)

Income (Loss), per pound

$ 0.8

$ 0.53

$ (0.27)

Need to sold Product T (Alternative 1)