Fitzpatrick Corporation makes a product sold to garden centers. It recently has discovered it could sell this product, Xylo, at an earlier stage in the production process to another manufacturer. Current costs to complete 2,000 pounds of Xylo are $10 per pound. Xylo sells for $12 per pound. It could sell AlmostXylo when it is only 75% complete as to total cost for $8.50 per pound. If AlmostXylo is processed into Xylo, operating income would:
A) Increase by $2,000.
B) Be unchanged.
C) Increase by $7,000.
D) Decrease by $5,000.

Question

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The Answer of Fitzpatrick Corporation makes a product sold to garden centers. It recently has discovered it could sell this product, Xylo, at an earlier stage in the production process to another manufacturer. Current costs to complete 2,000 pounds of Xylo are $10 per pound. Xylo sells for $12 per pound. It could sell AlmostXylo when it is only 75% complete as to total cost for $8.50 per pound. If AlmostXylo is processed into Xylo, operating income would:
A) Increase by $2,000.
B) Be unchanged.
C) Increase by $7,000.
D) Decrease by $5,000.

Fitzpatrick Corporation Makes a Product Sold to Garden Centers