BUS $341-$ MANAGERIAL ACCOUNTING $/$ HANDOUT $5$

$($Process further or not$/$ Priority order$-$Sales Mix$/$Close a Division or Not$)$

Q$1.$ Perez Industries produces three products from a single operation. Product A sells for $$3$ per unit, Product B sells for $$6$ per unit and Product C sells for $$9$ per unit. When B is processed further, there are additional unit costs of $$3$ and its new selling price is $$10$ per unit. Each product is allocated $$2$ of joint costs from the initial production operation. Should Product B be processed further or should it be sold at the end of the initial operation?

Q$2.$ All$-$Bagels Inc. produces and sells $20$ types of bagels by the dozen. Bagels are priced at $$6\mathrm{.}00$ per dozen and cost $$0\mathrm{.}20$ per unit to produce. The company is considering further processing the bagels into two products: bagels with cream cheese fand bagel sandwiches. It would cost an additional $$0\mathrm{.}50$ per unit to produce bagels with cream cheese, but the new selling price would be $$2\mathrm{.}50$ each. It would cost an additional $$1\mathrm{.}00$ per sandwich to produce bagel sandwiches, but the new selling price would be $$3\mathrm{.}50$ each.

Identify the relevant per$-$unit costs and revenues for the alternatives.

Based on the information in $1,$ should All$-$Bagels Inc. expand its product offerings?

Suppose that All$-$Bagels Inc. did expand its product line to include bagels with cream cheese and bagel sandwiches. Based on customer feedback, the company determined that it could further process those two products into bagels with fruit and cream cheese and bagel sandwiches with cheese. The company's accountant compiled the following information:

$\backslash$table$[[$Product $($per unit$),\backslash$table$[[$Sales Revenue$],[$if Sold with No$],[$Further Processing$]],\backslash$table$[[$Sales Revenue$],[$if Processed$],[$Further$]],\backslash$table$[[$Additional$],[$Processing$],[$Costs$]]],[\backslash$table$[[$Bagels with cream cheese$]],$$$2\mathrm{.}50,$$$3\mathrm{.}50,$Fruit: $$1\mathrm{.}00$