Question

Process or Sell

Product T is produced for $3.36 per pound. Product T can be sold without additional processing for $4.26 per pound, or processed further into Product U at an additional cost of $0.36 per pound. Product U can be sold for $4.52 per pound.

Prepare a differential analysis dated September 17, on whether to sell T (Alternative 1) or process further into U (Alternative 2). If required, round your answers to the nearest whole dollar.

Differential Analysis
Sell Product T (Alt. 1) or Process Further into Product U (Alt. 2)
September 17
	Sell Product T (Alternative 1)	Process Further into Product U (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues, per pound	$	$	$
Costs, per pound
Income (Loss), per pound	$	$	$

Should Product T be sold (Alternative 1) or processed further into Product U (Alternative 2)?

Answer 1

Differential Analysis
Sell Product T (Alt. 1) or Process Further into Product U (Alt. 2)
September 17
	Sell Product T (Alternative 1)	Process Further into Product U (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues, per pound	4.26	4.52	0.26
Costs, per pound	3.36	3.72	0.36
Income (Loss), per pound	0.90	0.80	(0.10)
Product T be sold (Alternative 1) as is