Exercise 23-8 Sell or process further LO A1

Cobe Company has already manufactured 20,000 units of Product A at a cost of $25 per unit. The 20,000 units can be sold at this stage for $450,000. Alternatively, the units can be further processed at a $270,000 total additional cost and be converted into 5,400 units of Product B and 11,900 units of Product C. Per unit selling price for Product B is $108 and for Product C is $58. 1. Prepare an analysis that shows whether the 20,000 units of Product A should be processed further or not.

Sell as is Process Further 450,0001,273,400 Sales Relevant costs: Costs to process further 823,400 Total relevant costs 823,400 S 450,000 S823, Income (loss) 823,400 Incremental net income (or loss) if processed further $ 373,400 Incremental income The company should process further