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 $2.00 and total fixed costs are $10,000. The cat food can be sold as it is for $9.25 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,200 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,200 bags of Feline Surprise, which can be sold for $8.25 and $6.25 per bag, respectively. The net advantage (incremental income) of processing Special Export further into Prime and Feline Surprise would be:
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