Question

A company has already incurred $5,000 of costs in producing 6,000 units of Product XY. Product XY can be sold as is for $15 per unit. Instead, the company could incur further processing costs of $8 per unit and sell the resulting product for $21 per unit. Should the company sell Product XY as is or process it further? (Any loss amount should be indicated with minus sign.)

Answer 1

Answer:

Company like to sell product XY but not process it further.

Explanation:

Given:

Original cost = $5,000

No. of units = 6,000

Sales price per unit = $15  

Processed cost = $8 per unit

New sales price = $21 per unit

Computation:

Old net profit = (6,000)(15) - 5000

Old net profit = $85,000

New net profit = (6,000)(21-8)

New net profit = $78,000

Profit from process is less than profit from sell

Company like to sell product XY but not process it further.