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15 December, 04:48

Ahngram Corp. has 1,000 carton of oranges that cost $44 per carton in direct costs and $25.00 per carton in indirect costs and sold for $64 per carton. The oranges can be processed further into orange juice at an additional cost of $21.00 and sold at a price of $114. The incremental income (loss) from processing the oranges into orange juice would be:

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  1. 15 December, 07:42
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    It is more profitable to continue processing.

    Explanation:

    Giving the following information:

    Ahngram Corp. has 1,000 cartons of oranges that cost $44 per carton in direct costs and $25.00 per carton in indirect costs and sold for $64 per carton. The oranges can be processed further into orange juice at an additional cost of $21.00 and sold for $114.

    First, we need to calculate the income before processing and then the income after processing:

    Before processing:

    Income = 1,000 * (64 - 44 - 25) = - $5,000

    After processing:

    Income = 1,000 * (114 - 69 - 21) = $24,000

    It is more profitable to continue processing.
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