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Concord Corporation produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period: Product Sales Value at Split-off Additional Variable Costs Sales Value after Further Processing Green lumber $159600 $24000 $178000 Rough lumber 126000 28500 176400 Sawdust 106000 20300 134400 What is the increase in profit if the appropriate products are processed further?

Respuesta :

jepessoa

Answer:

only two products should be processed further because they will generate additional profit:

  • further processing rough lumber generates $21,900 in additional profits
  • further processing sawdust generates $8,100 in additional profits
  • total additional profits = $30,000

Explanation:

Product              Sales value        Additional var.       Sales value after

                          at split-off          costs                       further processing

Green lumber    $159,600          $24,000                 $178,000

Rough lumber    $126,000          $28,500                $176,400

Sawdust             $106,000          $20,300                 $134,400

the additional profits generated by further processing are:

green lumber = ($178,000 - $159,600) - $24,000 = -$5,600

rough lumber = ($176,400 - $126,000) - $28,500 = $21,900

sawdust = ($134,400 - $106,000) - $20,300 = $8,100

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