Acompany has a process that results in 34000 pounds of product a that can be sold for $8 per pound. an alternative would be to process product a further at a cost of $227800 and then sell it for $14 per pound. should management sell product a now or should product a be processed further and then sold? what is the effect of the action?

After calculating, we get to know that the Product A should be sell now because, it show a difference of $23,800 through which company can earn more in the future. As the company will be better off by $23,800

Explanation:

For calculation, following things need to be considered which is shown below:

1. Product A process costing = Pounds × Per pound price

                                            = 34,000 × $8

                                            = $272,000

2. Product A costing after selling = Pounds × sale price per pound

                                                   = 34,000 × $14

                                                   = $476,000

3. Difference of costing :

=  Product A costing after selling - Product A process costing

= $476,000 - $272,000

= $204,000

4. Invested amount = $227,800

5. Actual Difference = Invested amount - costing difference

                                  = $227,800 - $204,000

                                  = $23,800

After calculating, we get to know that the Product A should be sell now because, it show a difference of $23,800 through which company can earn more in the future. As the company will be better off by $23,800

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