What would be net advantage of processing green health

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Reference no: EM131912988

Problem

Maxim manufactures a hamster food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $2.30 and total fixed costs are $10,000. The hamster food can be sold as it is for $9.55 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,500 cost. The additional processing will yield 10,000 bags of Premium Green and 3,500 bags of Green Deluxe, which can be sold for $8.55 and $6.55 per bag, respectively.

What would be net advantage (incremental income) of processing Green Health further into Premium Green and Green Deluxe?

Reference no: EM131912988

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