Question

______________ - ____________________ = Gain/(loss) on further processing

Answer 1

Incremental sales revenue - Further processing costs = Gain/(loss) on further processing

There may be two situations:

i) When Incremental sales revenue is more than Further processing costs, there is a gain on Further processing.

Incremental sales revenue = $10,000

Further processing costs = $8,000

Gain on further processing = Incremental sales revenue - Further processing costs

= 10,000 - 8,000

= $2,000

ii) When Incremental sales revenue is less than Further processing costs, there is a loss on Further processing.

Incremental sales revenue = $10,000

Further processing costs = $11,000

Loss on further processing = Incremental sales revenue - Further processing costs

= 10,000 - 11,000

= - $1,000

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