Question

1. Process or Sell

   Product A is produced for $3.56 per pound. Product A can be sold without additional processing for $4.22 per pound or processed further into Product B at an additional cost of $0.36 per pound. Product B can be sold for $4.38 per pound.

   Prepare a differential analysis dated November 15 on whether to sell A (Alternative 1) or process further into B (Alternative 2). If required, round your answers to the nearest whole dollar. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

   Differential Analysis
   Sell Product A (Alt. 1) or Process Further into Product B (Alt. 2)
   November 15
   	Sell Product A (Alternative 1)	Process Further into Product B (Alternative 2)	Differential Effect on Income (Alternative 2)
   Revenues, per unit	$	$	$
   Costs, per unit
   Income (Loss), per unit	$	$	$

   Should Product A be sold (Alternative 1) or processed further into Product B (Alternative 2)?
   

Answer 1

	Differential analysis:
					Sell Product A (Alternative 1)	Process Further into Product B (Alternative 2)	Differential Effect on Income (Alternative 2)
	Revenues, per unit				4.22	4.38	0.16
	Costs, per unit				3.56	3.92	-0.36
						(3.56+0.36)
	Income (Loss), per unit				0.66	0.46	-0.20
	Product A should be sold (Alternative 1) since it results in a decrease in income of $ 0.20 per unit if processed further.