A company has already incurred a $100 cost in partially producing its two products.Their selling prices when partially and fully processed are shown in the table below with the additional costs necessary to finish their processing.Based on this information, the company should process only product A further.
$$\begin{array} { | c | c | c | c | }
\hline \text { Product } & \begin{array} { c }
\text { Unfinished } \
\text { Selling Price }
\end{array} & \begin{array} { c }
\text { Finished } \
\text { Selling Price }
\end{array} & \begin{array} { c }
\text { Further } \
\text { Processing Costs }
\end{array} \
\hline \text { A } & \$ 200 & \$ 300 & \$ 120 \
\hline \text { B } & 75 & 130 & 45 \
\hline
\end{array}$$

Question

A company has already incurred a $100 cost in partially producing its two products.Their selling prices when partially and fully processed are shown in the table below with the additional costs necessary to finish their processing.Based on this information, the company should process only product A further.
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Product } & \begin{array} { c } 
\text { Unfinished } \
\text { Selling Price }
\end{array} & \begin{array} { c } 
\text { Finished } \
\text { Selling Price }
\end{array} & \begin{array} { c } 
\text { Further } \
\text { Processing Costs }
\end{array} \
\hline \text { A } & \$ 200 & \$ 300 & \$ 120 \
\hline \text { B } & 75 & 130 & 45 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The net gain from further processing product A is $300 - $200 - $120 = -$20, which is a loss. For product B, the net gain is $130 - $75 - $45 = $10, which is a profit. Therefore, the company should process product B further, not product A.

A Company Has Already Incurred a $100 Cost in Partially