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Unformatted text preview: 1510 1522 (continued) (3) (continued) The total cost of buying the connectors is given by the cost equation: Cost of buying = $1 .80x These total costs are equal when: $1 .80x = $1 .40x + $15,000 $0.40x = $15,000 x = 37 ,500 connectors 1523 Process Further into (1) Sell Shampoo Shampoo/Conditioner Sales revenue (3,000 units) $30,000 $48,000 Relevant variable costs: Further processing costs $12,000 Variable selling costs $3,000 7 ,500 Total relevant costs (3,000) (19,500) Sales minus relevant variable costs $27 ,000 $28,500 Shampoo should be processed further into shampoo/conditioner because $1 ,500 more profit ($28,500 $27 ,000) will be earned. This conclusion also can be reached by comparing incremental revenue with incremental costs as follows: Incremental revenue 3,000 units x ($16 $10) = $18,000 Incremental costs: Further processing 3,000 units x $4.00 = $12,000 Selling costs 3,000 units x ($2.50 $1 .00) = 4,500 (16,500) Increase in profit from further processing $ 1 ,500 ...
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This homework help was uploaded on 04/08/2008 for the course ACC 102 taught by Professor Drucker during the Fall '07 term at Coastal Carolina University.
 Fall '07
 Drucker

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