Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $8.55 per pound to produce.
What is the differential cost of producing Product D?
A) $6.50 per pound
B) $8.55 per pound
C) $17.00 per pound
D) $5.25 per pound

Question

Quizplus · Accepted Answer

The differential cost of producing Product D can be calculated as:
Cost of producing Product D - Cost of producing Product J
= $15.75 + $8.55 - $15.75
= $8.55 per pound

Therefore, it would be profitable for Carmen Co. to further process Product J to produce Product D, as the selling price of Product D is higher than the differential cost of producing it.

Carmen Co Can Further Process Product J to Produce Product D