It costs Mills, Inc. $12 per unit to manufacture 2,000 units per month of a product that it can sell for $36 each. Alternatively, Mills could process the units further into a more complex product, which would cost an additional $22 per unit. Mills could sell the more complex product for $57 each. How would processing the product further affect Mills' profit.

Question

Business

Francis

23 October, 06:48

It costs Mills, Inc. $12 per unit to manufacture 2,000 units per month of a product that it can sell for $36 each. Alternatively, Mills could process the units further into a more complex product, which would cost an additional $22 per unit. Mills could sell the more complex product for $57 each. How would processing the product further affect Mills' profit.

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Answers (1)

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Gillian Wiley · Answer 1

It is more convenient to sell before continue processing.

Explanation:

Giving the following information:

It costs Mills, Inc. $12 per unit to manufacture 2,000 units per month of a product that it can sell for $36 each. Alternatively, Mills could process the units further into a more complex product, which would cost an additional $22 per unit. Mills could sell the more complex product for $57 each.

Pre processing contribution margin = 36 - 12 = 24

Post processing CM = 57 - 34 = $23

It is more convenient to sell before continue processing.