Product T is produced for $3.90 per pound. Product T can be sold without additional processing for $4.65 per pound,

Product T is produced for $3.90 per pound. Product T can be sold without additional processing for $4.65 per pound, or processed further into Product U at an additional cost of $0.58 per pound. Product U can be sold for $5.30 per pound. Prepare a differential analysis dated August 2, 2014, on whether to sell Product T (Alternative 1) or process further into Product U (Alternative 2).

Answer:

Differential Analysis 

Sell Product T (Alt. 1) or Process Further into Product U (Alt. 2) 

August 2, 2014 

 

 

Sell Product T 

(Alternative 1) 

Revenues, per unit $4.65 $5.30 $0.65 

Costs, per unit –3.90 –4.48* –0.58 

Income (Loss), per unit $0.75 $0.82 $0.07 

    

* $3.90 + $0.58