A company has a process that results in 12,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $80,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold?

Question

Business

Urijah Carey

23 May, 20:41

A company has a process that results in 12,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $80,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold?

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Answers (1)

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Carlos · Answer 1

The correct answer is management should sell Product A now.

Explanation:

According to the scenario, computation of the given data are as follows:

Total production = 12,000 pounds

Sell price = $8 per pound

If process further, Cost = $80,000

Selling price = $14 per pound

So, If we sell the product without further process, than

Total sale value = 12,000 * $8 = $96,000

And, if we sell the product after further processing, then

Total sale value = (12,000 * $14) - $80,000

= $88,000.

As, sales value is more in selling the product without further process, so management should sell the product without further processing it.