Question
Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag
Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag are $3.00 and total fixed costs are $10,000. The cat food can be sold as it is for $8.35 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,800 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,800 bags of Feline Surprise, which can be sold for $7.35 and $5.35 per bag, respectively. The net advantage (incremental income) of processing Special Export further into Prime and Feline Surprise would be: $93,830. $91,030. $10,330. $7,530. $2,800.
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