Relevant cost and sell or process further

Assignment Help Business Management

Reference no: EM132554296

Part 1: Relevant Cost/Sell or Process Further

Farrugia Corporation produces two intermediate products, A and B, from a common input. Intermediate product A can be further processed into end product X. Intermediate product B can be further processed into end product Y. The common input is purchased in batches that cost $36 each and the cost of processing a batch to produce intermediate products A and B is $15. Intermediate product A can be sold as is for $21 or processed further for $14 to make end product X that is sold for $32. Intermediate product B can be sold as is for $44 or processed further for $28 to make end product Y that is sold for $64.

Required:

a. Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing one batch of the common input into the end products X and Y? Show your work.

b. Should each of the intermediate products, A and B, be sold as is or processed further into an end product? Explain.

Part 2: Relevant Cost/Dropping a Product

The management of Woznick Corporation has been concerned for some time with the financial performance of its product V86O and has considered discontinuing it on several occasions. Data from the company's accounting system appear below:

Sales ................................................................ Variable expenses............................................ Fixed manufacturing expenses ........................ Fixed selling and administrative expenses ......

$150,000 $72,000 $50,000 $33,000

In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $30,000 of the fixed manufacturing expenses and $13,000 of the fixed selling and administrative expenses are avoidable if product V86O is discontinued.

A. According to the company's accounting system, what is the net operating income earned by product V86O?

B. What would be the effect on the company's overall net operating income if product V86O were dropped?

Reference no: EM132554296

Questions Cloud

Employment and labor law : Research recent cases (2015-2017) involving employment discrimination with regard to either sexual orientation or religious discrimination.

What is the family and medical leave act : What is the Family and Medical Leave Act (FMLA)? how did recent legislation with regard to same-sex marriage garner attention

Basic economic principles of trade : You explored the basic economic principles of trade, choice, opportunity costs, and scarcity, along with the law of demand.

Utilize their equipment to perform the job : Write a essay on contractors that utilize their equipment to perform the job and the depreciation of the equipment

Relevant cost and sell or process further : Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing

Would you advise friend to invest in this company : The final written paper requires you to prepare a well-written titled "Would You Advise a Friend to Invest in This Company?"

How many grams of nacl are needed : Show your process for solving this problem, including clearly showing units

Process down into a large number of complex biochemical : Rather than converting energy from glucose in a single step, human cells break this process down into a large number of complex biochemical processes.

Concerning the equilibrium concentration : Which of the following is true concerning the equilibrium concentration of Ca2+?

User Account

All Pages