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Ostrowski and Smith Plastics (O&S) produce three less popular action figures for Marvel's Avengers product line: Ant-Man, Nebula, and Rocket. Based upon expected sales, O&S
Ostrowski and Smith Plastics (O&S) produce three less popular action figures for Marvel's Avengers product line: Ant-Man, Nebula, and Rocket. Based upon expected sales, O&S develops the following income statement: Ant Man Nebula Rocket Total Sales value after processing 500,000 $ 450,000 S 350,000 $ 1,300,000 Costs incurred AFTER split-off 175,000 $ 150,000 S 100,000 S 425,000 Net processing revenue S 325,000 300,000 $ 250,000 S 875,000 Joint costs $ 680,000 Expected Net Income 195,000 O&S purchases 160,000 pounds (Ibs.) of plastic pellets for $3.00 per lb. In production, each action figure uses the following amounts of Pliable Plastic: Ant-Man = 80,000 lbs., Nebula = 50,000 lbs., and Rocket = 30,000 lbs. The pellets are used to produce the Pliable Plastic used to produce the action figures. Instead of making action figures, O&S could instead sell the Pliable Plastic for $5.00 per pound. Compute the change in expected net income if O&S produces only products that remain profitable after split-off. Income increases $50,000 O Income increases $65,000 O Income increases $75,000 O Income increases $80,000 O None of the other answers are correct
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