A company has already incurred a $24,000 cost in partially producing its two products.Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing.Based on this information,should any products be processed further?
$$\begin{array} { | c | c | c | c | }
\hline \text { Product } & \begin{array} { c }
\text { Unfinished } \
\text { Selling Price }
\end{array} & \begin{array} { c }
\text { Finished } \
\text { Selling Price }
\end{array} & \begin{array} { c }
\text { Further } \
\text { Processing } \
\text { Costs }
\end{array} \
\hline \text { A } & \$ 900 & \$ 1,000 & \$ 65 \
\hline \text { B } & 600 & 675 & 76 \
\hline
\end{array}$$
A) Both product A and product B should be processed further.
B) Neither product A nor product B should be processed further.
C) Only product B should be processed further.
D) Only product A should be processed further.
E) A processing further decision cannot be made from the available data.

Question

A company has already incurred a $24,000 cost in partially producing its two products.Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing.Based on this information,should any products be processed further?
$$\begin{array} { | c | c | c | c | } 
\hline \text { Product } & \begin{array} { c } 
\text { Unfinished } \
\text { Selling Price }
\end{array} & \begin{array} { c } 
\text { Finished } \
\text { Selling Price }
\end{array} & \begin{array} { c } 
\text { Further } \
\text { Processing } \
\text { Costs }
\end{array} \
\hline \text { A } & \$ 900 & \$ 1,000 & \$ 65 \
\hline \text { B } & 600 & 675 & 76 \
\hline
\end{array}$$
A) Both product A and product B should be processed further.
B) Neither product A nor product B should be processed further.
C) Only product B should be processed further.
D) Only product A should be processed further.
E) A processing further decision cannot be made from the available data.

Quizplus · Accepted Answer

Product A should be processed further because the additional revenue from finishing it ($1,000 - $900 = $100) exceeds the further processing cost ($65). Product B should not be processed further because the additional revenue ($675 - $600 = $75) does not exceed the further processing cost ($76).

A Company Has Already Incurred a $24,000 Cost in Partially