At the end of manufacturing in Process |, product K can be sold for £10 per litre.

Alternatively, product K could be further processed into product KK in process II at an additional cost of £1 per litre input into this process. Process II is an existing process with spare capacity in which a loss of 10 per cent of the input volume occurs. At the end of the further process, product KK could be sold for £12 per litre. Which of the following statements is correct in respect of 9000 litres of product K?

(a) Further processing into product KK would increase profits by £9000.

(b) Further processing into product KK would increase profits by £8100.

(c) Further processing into product KK would decrease profits by £900.

(d) Further processing into product KK would decrease profits by £1800.

(2 marks)

ACCA Financial Information for Management