Question

# It costs Camp, Inc. \$48 per unit to manufacture 1,000 units per month of a product...

It costs Camp, Inc. \$48 per unit to manufacture 1,000 units per month of a product that it can sell for \$75 each. Alternatively, Camp could process the units further into a more complex product, which would cost an additional \$41 per unit. Camp could sell the more complex product for \$110 each. How would processing the product further affect Camp's profit?

Solution:

For product having sale price of \$75 per unit:

Manufacturing cost = \$48*1000 units = \$48000

Sales revenue = \$75*1000 units = \$75000

Therefore, Profit = \$75000-\$48000 = \$27000

​​​​​​For product having sale price of \$110 per unit:

Manufacturing Cost = (\$48+\$41)*1000 units = \$89000

Sales revenue = \$110*1000 units = \$110000

Therefore, Profit = \$110000-\$89000 = \$21000

Hence it is clear from the above calculation that processing the product further will decrease Camp's profit by \$6000 (\$27000-\$21000).

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