Question

Cantrell Company has already manufactured 19,000 units of Product A at a cost of $30 per unit. The 19,000 units can be sold at this stage for $590,000. Alternatively, the units can be further processed at a $440,000 total additional cost and be converted into 4,800 units of Product B and 7,100 units of Product C. Per unit selling price for Product B is $75 and for Product C is $55.

  

1.	Calculate the Incremental Net Profit (or loss) if processed further. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

  

Incremental net profit (or loss)

$

2.

Indicate whether the 19,000 units of Product A should be processed further or not.

	Process further
	Sell without further processing

Answer 1

					process
				Sell as is	further
Sales				590,000	750500
Relevant costs
costs to process further					440,000
total relevant costs					440,000
income(loss)				590,000	310,500
incremetal net income (loss) if processed further					-279,500	incremental loss
the company should		not	process further
		that is sell without further processing