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.

Prepare an analysis that shows whether the 28,000 units of Product A should be processed further or not.

Sell as is Process Further
sales
Relevant Cost
Total relevant cost
Income (loss)
Incremental net income or loss
The company should

                       Cobe Company

                       Analysis statement

sell as pocess further

Sales:

      product B (5,600*$105)                          $588,000

      product C ( 11,200*$70)                            784,000

                                                                        1,372,000

Relevant Cost :

manufacturing cost (28,000*28)  784,000

Additional cost                              420,000     1,204,000

Income                                                                 168,000

The incremental net income is $168,000.

Therefore, the company should process further before selling the product

Explanation:

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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answerangel investor;