It costs Elmwood,Inc.$78 per unit to manufacture 1,000 units per month of a product that it can sell for $90 each.Alternatively,Elmwood could sell the units at an earlier stage of processing,which would save $36 per unit.Elmwood could sell the simpler product for $60 each.How would selling the simpler product affect Elmwood's profit?
A)Profit would increase by $6,000.
B)Profit would increase by $30,000.
C)Profit would decrease by $6,000.
D)Profit would decrease by $30,000.

Question

Quizplus · Accepted Answer

By selling the simpler product, Elmwood saves $36 per unit in manufacturing costs, reducing the cost to $42 per unit. Selling at $60 per unit results in a profit of $18 per unit. Selling 1,000 units at $90 each gives a profit of $12,000 ([$90 - $78] * 1,000). Selling the simpler product gives a profit of $18,000 ([$60 - $42] * 1,000). The profit increases by $6,000 ($18,000 - $12,000).

It Costs Elmwood,Inc