Product D is produced for $24 per gallon. Product D can be sold without additional processing for $36 per gallon, or processed further into Product E

Product D is produced for $24 per gallon. Product D can be sold without additional processing for $36 per gallon, or processed further into Product E at an additional cost of $9 per gallon. Product E can be sold for $43 per gallon. Prepare a differential analysis dated February 26, 2014, on whether to sell Product D (Alternative 1) or process further into Product E (Alternative 2).

Answer:


Differential Analysis 
Sell Product D (Alt. 1) or Process Further into Product E (Alt. 2) 
February 26, 2014 

Sell 
Product D 
(Alternative 1) 
Process 
Further into 
Product E 
(Alternative 2) 
Revenues, per unit $36 $43 $7 
Costs, per unit –24 –33* –9 
Income (Loss), per unit $12 $10 –$2 
    
* $24 + $9 
The company should sell Product D without further processing.