Reference no: EM132610283
Problem 1: Products A, B, and C are produced from a single raw material input. The raw material costs are $90,000, from which 5,000 units of A, 10,000 units of B, and 15,000 units of C can be produced each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed further at a cost of $12,500 and then sold for $5 per unit. What is the correct course of action regarding Product A?
A) It should be sold at the split-off point, since further processing will result in a loss of $2,500 each period.
B) It should be processed further, since this will increase profits by $2,500 each period.
C) It should be sold at the split-off point, since further processing would result in a loss of $0.50 per unit.
D) It should be processed further, since this will increase profits by $12,500 each period.
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