Question

A company processes a product called Harbalt that sells in batches of 10,000 pounds for $4.00 per pound. They can process the product further to create another product called Larbunz that sells for $7.50 per pound. If they do process Larbunz, they lose 10% through evaporation. The cost to perform the additional process for creating Larbunz is $22,000.

Question: Should the company product Harbalt or Larbunz? Please show the work to explain your answer.

Answer 1

Ans:The company Should Produce the product Larbunz

Explanation:

S.No	Particulars	Amount
1	Number of Pounds Produced	10,000
2	Lose of 10% Through Evaporation (10,000*10%)	1,000
3	Number of Pounds after additional Process (1-2)	9,000
4	Additonal Income after further Process(9000*(7.50-4))	$31,500
5	Additional Cost for further Process	$22,000
6	Additional Income after futher Process (4-5)	$9,500

The company Should Produce the product Larbunz as It Increases the Income or Generating the additional Income of $9500

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