A company produces a product that currently costs $8 in variable
costs and $2 in fixed costs. It sells the product for $14. If
processed further, the company will spend an additional $6 in
variable costs and $2 in fixed costs. Each unit would then be sold
for $24.
Why would the company choose to process further?
Yes company should Choose to Process further
Detail working for your refrence
| Sells Price | $14.00 |
| Less: Variable cost | $8.00 |
| Less: Fixed Cost | $2.00 |
| Margin | $4.00 |
| Computation of Margin from processed further | |
| Additional Cost to be incurred ( 6+2) | $8.00 |
| Existing Margin Lost | $4.00 |
| Total Relevant Cost | $12.00 |
| Sales Price after further processing | $24.00 |
| Net Margin after further processing (24-12) | $12.00 |
A company produces a product that currently costs $8 in variable costs and $2 in fixed...