concord bunyon FINANCIAL & MANAGERIAL (ACC 110/ Assignment Gradebook ORION Downl
ID: 2562804 • Letter: C
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concord bunyon FINANCIAL & MANAGERIAL (ACC 110/ Assignment Gradebook ORION Downloadable eTextbook ent 46 PM/Remalning: 123 min CALCULATOR FUAL SCREEN PRINTER VERSTON BACK Multiple Choice Question 126 Concord Bunyon Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period: Sales Value at Solit-off Variable Costs Further Processing Sales Value after Product Green lumber $161600 Rough Additional $26800 28500 20300 $186600 176400 34400 126000 lumber Sawdust 106000 Which products should be processed further? O Green lumber and sawdust Rough lumber and sawdust All three products O Green lumber and rough lumber Open Show Work Click if you would like to Show Work for this question: SAVE FOR LATER SUBMIT ANSWE Question Attempts: O of 1 used MacBook AirExplanation / Answer
Answer:
Option 2 i.e. Rough Lumber and Sawdust.
Rough Lumber and Sawdust should be processed further, as only these products will be able to cover the Additional Variable Cost incurred in Further processing, even they will be earn a profit after recovering additional variable cost.
Green Lumber:
Sales Value at Split Off = $161,600
Additional variable Cost = $26,800
Sales Value after Further processing = $186,600
Difference in revenue after Further processing = $186,600 - $161,600 = $25,000
Additional revenue earned after further processing is less than the Additional Variable cost incurred in Variable Cost.
Rough Lumber:
Sales Value at Split Off = $126,000
Additional variable Cost = $28,500
Sales Value after Further processing = $176,400
Difference in revenue after Further processing = $176,400 - $126,000 = $50,400
Additional revenue earned after further processing is more than the Additional Variable cost incurred in Variable Cost, which indicates that the Product is earning profit after Further processing.
Sawdust:
Sales Value at Split Off = $106,000
Additional variable Cost = $20,300
Sales Value after Further processing = $134,400
Difference in revenue after Further processing = $134,400 - $106,600 = $28,400
Additional revenue earned after further processing is more than the Additional Variable cost incurred in Variable Cost, which indicates that the Product is earning profit after Further processing.
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