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Process or Sell Product T is produced for $3
Process or Sell Product T is produced for $3.38 per pound. Product T can be sold without additional processing for $4.01 per pound or processed further into Product U at an additional cost of $0.36 per pound. Product U can be sold for $4.36 per pound. Prepare a differential analysis dated November 15 on whether to sell I (Alternative 1) or process further into U (Alternative 2). If required, round your answers to the nearest whole dollar. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Product T (Alt. 1) or Process Further into Product U (Alt. 2) November 15 Process Further Differential Effect Sell Product I into Product on Income (Alternative 1) U (Alternative 2) (Alternative 2) Revenues, per unit 4.01 4.36 35 Costs, per unit -3.38 -3.74 -0.36 Income (Loss), per unit 0.63 0.62 -0.01 Should Product T be sold (Alternative 1) or processed further into Product U (Alternative 2)? Sell Product I
Expert Solution
Yes ,product T should be sold without any further processing.
If we sell Product T we are gaining a profit of $0.63 per unit .
When we further process the Product T into product U ,we are incurred costs which are not more comparitively to profit gained fom Product U.
profit gained from selling product U is $0.62 per unit .
AS we are loosing 0.01$ per unit if we process and sell prodcut U .
So ,it is best to sell Product T without and further Processing.
The above done caluclations by you are correct.
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