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26 August, 00:43

Product J19 is produced for $11 per gallon. Product J19 can be sold without additional processing for $18 per gallon, or processed further into Product R33 at an additional cost of $7 per gallon. Product R33 can be sold for $24 per gallon.

Required:

Prepare a differential analysis dated April 30 on whether to sell Product J19 (Alternative 1) or process further into Product R33 (Alternative 2).

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Answers (1)
  1. 26 August, 02:01
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    Answer: If Product J19 is processed further into Product R33, the company would make $1 less than if Product J19 was sold as is.

    Explanation:

    Alternative 1 - Product J19

    We are given the following for Alternative 1

    Sales Price = $18

    Cost = $11

    Therefore the income from Alternative 1 is,

    = 18 - 11

    =$7

    Alternative 2 - Product R33.

    We are given the following,

    Sales Price = $24

    Cost = $11 of the original + $7 additional cost

    = $18

    Thus income is,

    = 24 - 18

    = $6

    The income from Alternative 1 is $7 while the income from Alternative 2 is $6.

    This means that if Product J19 is processed further into Product R33 and sold, the company would make $1 less than if Product J19 was sold as is.
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