Barnes manufactures a specialty food product that can currently be sold for $22 per unit and has 20,000 units on hand. Alternatively, it can be further processed at a cost of $12,000 and converted into 12,000 units of Exceptional and 6,000 units of Premium. The selling price of Exceptional and Premium are $30 and $20, respectively. The incremental net income of processing further would be:

Question

Business

Zion Singleton

17 December, 04:53

Barnes manufactures a specialty food product that can currently be sold for $22 per unit and has 20,000 units on hand. Alternatively, it can be further processed at a cost of $12,000 and converted into 12,000 units of Exceptional and 6,000 units of Premium. The selling price of Exceptional and Premium are $30 and $20, respectively. The incremental net income of processing further would be:

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Answers (1)

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Vanessa Gamble · Answer 1

It is more convenient to continue processing.

Explanation:

Giving the following information:

Barnes manufactures a specialty food product that can currently be sold for $22 per unit and has 20,000 units on hand. Alternatively, it can be further processed for $12,000 and converted into 12,000 units of Exceptional and 6,000 units of Premium. The selling price of Exceptional and Premium are $30 and $20, respectively.

We don't have the information regarding the costs of processing further. Therefore, we will base our analysis in sales.

Sell now = 22*20,000 = $440,000

Continue processing = 12,000*30 + 6,000*20 = $480,000

It is more convenient to continue processing.