1)A company has a process that results in 25000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $167500 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?

Process further, the company will be better off by $150000.

Sell now, the company will be better off by $17500.

Sell now, the company will be better off by $167500.

Process further, the company will be better off by $17500.

2)

Blossom Inc. produces three separate products from a common process costing $100,300. Each of the products can be sold at the split-off point or can be processed further and then sold for a higher price. Shown below are cost and selling price data for a recent period.

		Sales Value at Split-Off Point				Cost to Process Further				Sales Value after Further Processing
Product 10			$59,400				$100,900				$190,100
Product 12			15,000				30,100				34,000
Product 14			55,600				149,400				215,900

Determine total net income if all products are sold at the split-off point.

Net income

$ __________

Determine total net income if all products are sold after further processing.

Net income

$ ___________

Calculate incremental profit/(loss) and determine which products should be sold at the split-off point and which should be processed further. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Product		Incremental profit (loss)		Decision
Product 10		$
Product 12		$
Product 14		$

Determine total net income using the results from previous part.

Net income

$________________

Is the net income different from that determined in part (b)?

Yes, net income is higher by $ _______________