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1. Maxim has already spent $30,500 to manufacture a hamster food product called Green Health....

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Question

Accounting

1. Maxim has already spent $30,500 to manufacture a hamster food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand that can be sold for $94,160. Alternatively, Maxim can process it further into a different product, Premium Green, at an additional cost of $6,325. If Maxim processes further, the Premium Green can be sold for $102,550. The incremental income to process further is:

Multiple Choice

a. $8,390.

b. $(8,390).

c. $2,065.

d. $(2,065).

e. $3,065.

2.

Epsilon Company can produce a unit of product for the following costs:

Direct material $ 7.40
Direct labor 23.40
Overhead 37.00
Total product costs per unit $ 67.80

An outside supplier offers to provide Epsilon with all the units it needs at $60.70 per unit. If Epsilon buys from the supplier, the company will still incur 30% of its overhead. Epsilon should choose to:

a. Buy since the relevant cost to make it is $67.80.

b. Make since the relevant cost to make it is $56.70.

c. Buy since the relevant cost to make it is $41.90.

d. Make since the relevant cost to make it is $41.90.

e. Buy since the relevant cost to make it is $56.70.

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