A company has a process that results in 1,000 kilograms of Product X that can be sold for $10 per kilogram.An alternative would be to process Product X further at a cost of $2,000 and then sell it for $13 per kilogram.Should management sell Product X now or should Product X be processed further and then sold?
A)Process further; the company will be better off by $1,000.
B)Sell now; the company will be better off by $1,000.
C)Process further; the company will be better off by $3,000.
D)Sell now; the company will be better off by $10,000.

Question

Quizplus · Accepted Answer

If sold now, revenue is $10/kg * 1000 kg = $10,000. If processed further, the cost is $2,000, and the new selling price is $13/kg, leading to revenue of $13/kg * 1000 kg = $13,000. The net benefit of processing further is $13,000 - $10,000 - $2,000 = $1,000.

A Company Has a Process That Results in 1,000 Kilograms