Nelli Mwalilino Chapter 8 ...

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Nelli Mwalilino 			 			 			 			 			 			 			 			 		 		 			Chapter 8 			 			 			 			 			 			 			 			 		 		 			Problem 8-18 			 			 			 			 			 			 			 			 		 		 			 			 			 			 			 			 			 			 			 		 		 			The cost of production per gram is $2.09 which is (2090)/1000 			 			 			 			 			 			 		 		 			 			 			 			 			 			 			 			 			 		 		 			Calculate the net profit per gram before processing as shown below 			 			 			 			 			 			 		 		 			 			 			 			 			 			 			 			 			 		 		 			Product 			N200 			HV87 			HMT45 			W989 			 			 			 			 		 		 			Sales price without further processing 			$1.89 			$2.93 			$3.30 			$0.76 			 			 			 			 		 		 			Less:Cost per gram 			2.09 			2.09 			2.09 			2.09 			 			 			 			 		 		 			 			 			 			 			 			 			 			 			 		 		 			Net profit/(loss)before processing per gram 			($0.20) 			$0.84 			$1.21 			($1.33) 			 			 			 			 		 		 			 			 			 			 			 			 			 			 			 		 		 			To calculate the net profit per gram before processing 			 			 			 			 			 			 			 		 		 			Product 			N200 			HV87 			HMT45 			W989 			 			 			 			 		 		 			Sales price without further processing (a) 			3.65 			3.44 			4.1 			2.17 			 			 			 			 		 		 			Cost per gram before processing 			2.09 			2.09 			2.09 			2.09 			 			 			 			 		 		 			Cost per gram of further processing 			0.73 			0.53 			0.82 			0.37 			 			 			 			 		 		 			Total cost (b) 			2.82 			2.62 			2.91 			2.46 			 			 			 			 		 		 			Net profit /(loss)after processing per gram (a)-(b) 			0.83 			0.82 			1.19 			-0.29 			 			 			 			 		 		 			 			 			 			 			 			 			 			 			 		 		 			Compare the net profits to decide of further processing 			 			 			 			 			 			 			 		 		 			Product 			N200 			HV87 			HMT45 			W989 			 			 			 			 		 		 			Net profit/(loss)before processing per gram 			($0.20) 			$0.84 			$1.21 			($1.33) 			 			 			 			 		 		 			Net profit/(loss)after processing per gram 			0.83 			0.82 			1.19 			-0.29 			 			 			 			 		 		 			Further processing 			YES 			NO 			NO 			YES 			 			 			 			 		 		 			 			 			 			 			 			 			 			 			 		 		 			 			 			 			 			 			 			 			 			 		 		 			The firm should opt for further processing if the net profit/(loss)after processing is more than net profit /(loss)before processing.

Robert · Accepted Answer

Memo
To: CEO, XYZ Co Pvt Ltd.
From: Strategic Analyst
Subject: Recommendations regarding processing
Dear Sir,
As per the information received regarding net profit and losses for different products for evaluations before and after the processing, a range of observations are performed and the results are indicated in the following table.
Relevant Cost Analysis
N200HV87HMT45W989Total
Net profit/(loss) - Sold without processing (per gram)  A
($0.20)$0.84$1.21($1.33)$0.52
Net profit/(loss) - Sold after processing (per gram)  B
$0.83$0.82$1.19($0.29)$2.55
Recommendation of Further processing YESNONOYES
Total grams per batch C
200          300          150           350          1,000         
Net profit/(loss) - Sold without processing  (A x C)
($40.00)$252.00$181.50($465.50)($72.00)
Most /Least Profitable products without processing MostLeast
Net profit/(loss) - Sold after processing  (B x C)
$166.00$246.00$178.50($101.50)$489.

Nelli Mwalilino Chapter 8 Problem 8-18 The cost of production per gram is $2.09 which is (2090)/1000 Calculate the net profit per gram before processing as shown below Product N200 HV87 HMT45 W989...

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Nelli Mwalilino
Chapter 8
Problem 8-18
The cost of production per gram is $2.09 which is (2090)/1000
Calculate the net profit per gram before processing as shown below
Product	N200	HV87	HMT45	W989
Sales price without further processing	$1.89	$2.93	$3.30	$0.76
Less:Cost per gram	2.09	2.09	2.09	2.09
Net profit/(loss)before processing per gram	($0.20)	$0.84	$1.21	($1.33)
To calculate the net profit per gram before processing
Product	N200	HV87	HMT45	W989
Sales price without further processing (a)	3.65	3.44	4.1	2.17
Cost per gram before processing	2.09	2.09	2.09	2.09
Cost per gram of further processing	0.73	0.53	0.82	0.37
Total cost (b)	2.82	2.62	2.91	2.46
Net profit /(loss)after processing per gram (a)-(b)	0.83	0.82	1.19	-0.29
Compare the net profits to decide of further processing
Product	N200	HV87	HMT45	W989
Net profit/(loss)before processing per gram	($0.20)	$0.84	$1.21	($1.33)
Net profit/(loss)after processing per gram	0.83	0.82	1.19	-0.29
Further processing	YES	NO	NO	YES
The firm should opt for further processing if the net profit/(loss)after processing is more than net profit /(loss)before processing.