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Maxim manufactures a hamster food product called Green Health. Maxim currently has 10,000 bags of...

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Accounting

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 $1.90 and total fixed costs are $10,000. The hamster food can be sold as it is for $9.15 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,100 cost. The additional processing will yield 10,000 bags of Premium Green and 3,100 bags of Green Deluxe, which can be sold for $8.15 and $6.15 per bag, respectively. The net advantage (incremental income) of processing Green Health further into Premium Green and Green Deluxe would be:

  • $100,565.

  • $98,465.

  • $9,065.

  • $6,965.

  • $2,100.

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