links to economic analysis Return to the setting of problem 3 above. Suppose two extra eustomers amveo One, eonveniently, wants 1 unit of product A and the second, eonveniently, wants 1.5 units of the processed further version of product B. (Any additional production of e can stiIl be sold for 10 per unit; however, no additional units of A or B can be sold at the earlier noted prices.) The first customer offers 180 for the unit of A and the second offers 500 in total for the 1.5 units of (further processed) B. What is Ralph' s incremental profit if these offers are accepted?

Now return to part [b] of the originai problem and pick one of your eosting methods, say where e is a by-product and the net joint eost is allocated on the basis of relative sales value at split-off. Using the apparent unit eost from the part [b]

caleulation, what is Ralph's incremental profit if these offers are accepted?

How do you reconcile the two sets of calculations? What happens here ifwe admit some of the joint eosts are best viewed as fixed costs?

AppendixLO1