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Unformatted text preview: 15-1115-23 (continued)(2) The solution to Requirement 1 shows that $1,500 more profit will beearned by further processing when the selling price of shampoo/conditioner is $16 per unit and sales will be 3,000 units. However, ifthe selling price of shampoo/conditioner is only $15 per unit insteadof $16, profit from further processing will be $3,000 less because ofthe reduction in sales revenue [($16 - $15) x 3,000 units]. In thiscase, further processing will now reduce profit made by selling shampooby $1,500. Thus, shampoo should not be processed further intoshampoo/conditioner if the selling price of shampoo/conditioner is only$15. Of course, if the company reduces the selling price, it may beable to sell more than 3,000 bottles of shampoo/conditioner which wouldaffect the profit. So, the decision of whether to sell or processfurther would depend on how many bottles of shampoo/conditioner the...
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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