It costs Camp, Inc. $65 per unit to manufacture 1,000 units per month of a produ

Question

It costs Camp, Inc. $65 per unit to manufacture 1,000 units per month of a product that it can sell for $103 each. Alternatively, Camp could process the units further into a more complex product, which would cost an additional $62 per unit. Camp could sell the more complex product for $159 each. How would processing the product further affect Camp's profit?

A) Profit would increase by $6,000.

B) Profit would increase by $56,000.

C) Profit would decrease by $6,000.

D) Profit would decrease by $56,000.

Explanation / Answer

Current profit per unit=(103-65)=$38

Total cost of processing=(65+62)=$127

Hence profit after processing=(159-127)=$32

Hence decrease in profit per unit=(38-32)=$6

Hence decrease in profits=(6*1000)=$6000(C)

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