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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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  1. 23 May, 21:49
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    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.
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