For each product, the increased revenues attainable by processing further should be balanced against the increased costs to process further. The increased revenue from processing Product X further is $20,000 ($80,000 ? $60,000), and the cost to process further is $14,000. The additional revenue is $6,000 greater than the additional cost. Thus Product X should be processed further because doing so will result in $6,000 additional net income before tax. The increased revenue from processing Product Y further will be $15,000 ($50,000 ? $35,000), and the cost to process further is $18,000. The additional revenue is $3,000 less than the additional cost. Thus Product Y should not be processed further because doing so will result in a $3,000 decrease in net income before tax.
For each product, the increased revenues attainable by processing further should be balanced against the increased costs to process further. The increased revenue from processing Product X further is $20,000 ($80,000 ? $60,000), and the cost to process further is $14,000. The additional revenue is $6,000 greater than the additional cost. Thus Product X should be processed further because doing so will result in $6,000 additional net income before tax. The increased revenue from processing Product Y further will be $15,000 ($50,000 ? $35,000), and the cost to process further is $18,000. The additional revenue is $3,000 less than the additional cost. Thus Product Y should not be processed further because doing so will result in a $3,000 decrease in net income before tax.
For each product, the increased revenues attainable by processing further should be balanced against the increased costs to process further. The increased revenue from processing Product X further is $20,000 ($80,000 ? $60,000), and the cost to process further is $14,000. The additional revenue is $6,000 greater than the additional cost. Thus Product X should be processed further because doing so will result in $6,000 additional net income before tax. The increased revenue from processing Product Y further will be $15,000 ($50,000 ? $35,000), and the cost to process further is $18,000. The additional revenue is $3,000 less than the additional cost. Thus Product Y should not be processed further because doing so will result in a $3,000 decrease in net income before tax.
For each product, the increased revenues attainable by processing further should be balanced against the increased costs to process further. The increased revenue from processing Product X further is $20,000 ($80,000 - $60,000), and the cost to process further is $14,000. The additional revenue is $6,000 greater than the additional cost. Thus Product X should be processed further because doing so will result in $6,000 additional net income before tax. The increased revenue from processing Product Y further will be $15,000 ($50,000 - $35,000), and the cost to process further is $18,000. The additional revenue is $3,000 less than the additional cost. Thus Product Y should not be processed further because doing so will result in a $3,000 decrease in net income before tax.
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Management wants to know whether to sell each product at the split-off point or to process the products further. Which one of the following options should be recommended to Ross' management?