Exercise 23-8 Sell or process further LO A1 Cobe Company has already manufactured 28,000 units of Product A at a cost of $28 per unit. The 28,000 units can be sold at this stage for $700,000. Alternatively, the units can be further processed at a $420,000 total additional cost and be converted into 5,600 units of Product B and 11,200 units of Product C. Per unit selling price for Product B is $105 and for Product C is $70. 1. Prepare an analysis that shows whether the 28,000 units of Product A should be processed further or not.

Cobe Company should process further  as it will increase its net income by $252, 000

Explanation:

A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.  

Also note that all cost incurred up to the point of crush are irrelevant to the decision to process further  

                                                                                               $

Revenue from Product B  (5,600× 105)                        588000

Revenue from Product C  (11200× 70)                          784000

                                                                                        1372000

Revenue from product      A                                       700,000

Additional revenue                                                         672000

Further processing cost                                               (420,000)

Net income from further processing                           252,000

Cobe Company should process further  as it will increase its net income by $252, 000

Analysis to show wether 28,000 units of product A should be processed or not

Explanation:

                                      sell as is      process further  

sales                        700000      1372000  

relevant cost    

cost to process further       0        420000  

total relevant cost               0        420000  

income                         700000        952000  

incremental income          252000

answer; /// the above statement is (true);

answer; personality;