Exercise 10-8 Sell or process further LO A1

Cobe Company has already manufactured 16,000 units of Product A at a cost of $25 per unit. The 16,000 units can be sold at this stage for $440,000. Alternatively, the units can be further processed at a $270,000 total additional cost and be converted into 5,600 units of Product B and 11,800 units of Product C. Per unit selling price for Product B is $102 and for Product C is $57. 1. Prepare an analysis that shows whether the 16,000 units of Product A should be processed further or not.

Sell as is Process Further Sales $ 440,000 Relevant costs: Costs to process further Total relevant costs (270,000) Income (loss) $ 440,000 Incremental net income (or loss) if processed Incremental income further The company should process further