Question

qs 23 - 7 (algo) sell or process lo p2
holmes company has already spent $68,000 to harvest peanuts. those peanuts can be sold as is for $83,500. alternatively, holmes can process further into peanut butter at an additional cost of $459,000. if holmes processes further, the peanut butter can be sold for $819,000.
(a) prepare a sell as is or process further analysis of income effects.
(b) should holmes sell as is or process further?
(a) sell or process analysis sell as is process further
revenue
costs
income
(b) the company should:

Explanation:

Step1: Calculate revenue for each option

• Sell as is: Revenue = $83,500
• Process further: Revenue = $819,000

Step2: Calculate costs for each option

• Sell as is: Costs = $68,000
• Process further: Costs = $68,000 + $459,000 = $527,000

Step3: Calculate income for each option

• Sell as is: Income = Revenue - Costs = $83,500 - $68,000 = $15,500
• Process further: Income = Revenue - Costs = $819,000 - $527,000 = $292,000

Answer:

(a)

Sell or Process Analysis	Sell as is	Process Further
Costs	$68,000	$527,000
Income	$15,500	$292,000

(b) The company should process further.