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Maxim manufactures a hamster food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag

Maxim manufactures a hamster food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $3.20 and total fixed costs are $10,000. The hamster food can be sold as it is for $8.55 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,600 cost. The additional processing will yield 10,000 bags of Premium Green and 3,600 bags of Green Deluxe, which can be sold for $7.55 and $5.55 per bag, respectively. The net advantage (incremental income) of processing Green Health further into Premium Green and Green Deluxe would be:

  • $95,480.

  • $92,880.

  • $9,980.

  • $7,380.

  • $2,600.

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