MC Qu. 54 Maxim manufactures a hamster food product.. Maxim manufactures a hamst

Question

MC Qu. 54 Maxim manufactures a hamster food product.. Maxim manufactures a hamster food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $3.70 and total fixed costs are $10,000. The hamster food can be sold as it is for $9.05 per bag or be processed further into Premiunm Green and Green Deluxe at an additional $2,100 cost. The additional processing will yield 10,000 bags of Premium Green and 3,100 bags of Green Deluxe, which can be sold for $8.05 and $6.05 per bag, respectively. The net advantage (incremental income) of processing Green Health further into Premium Green and Green Deluxe would be: Multiple Choice 99,255 97)55 8755 6655 $2500 MacBook Air

Explanation / Answer

Correct Answer : $ 6,655.

Workings:

No Further Processing Further Processing Incremental Effect $ $ $ Sales Revenue 90,500 99,255 8,755 Cost 47,000 49,100 (2,100) Net Advantage of Processing Green Health Further $ 6,655

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