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Maxim manufactures a hamster food product called Green Health. Maxim currently has 19,000 bags of Green Health on hand. The variable production costs per bag are $3.80 and total fixed costs are $30,000. The hamster food can be sold as it is for $9.00 per bag or be processed further into Premium Green and Green Deluxe at an additional cost. The additional processing will yield 19,000 bags of Premium Green and 5,000 bags of Green Deluxe, which can be sold for $8 and $6 per bag, respectively. Assuming Maxim further processes Green Health further into Premium Green and Green Deluxe, revenue from the two products would be: Multiple Choice $182,000. $181,000. $11,000. $10,000. $1,000.

Answer :

Answer:

The correct option is c. $11,000

Explanation:

For computing the revenues from both the products, first we have to calculate the sales value of premium green and green deluxe which is shown below:

Sales value of Premium Green = Production of bags × selling price of premium green

= 19,000 × $8

= $152,000

And, Sales value of Green Deluxe = Production of bags × selling price of green deluxe

= 5,000 × $6

= $30,000

So, the total sales value of both products is equals to

= $152,000 + $30,000

=$182,000

Now,

We have to compute the Green Health revenue which includes additional cost .The calculation is shown below

= Bags production × Additional cost per unit

= 19,000 × $9

= $171,000

So, the incremental revenue would be equals to

= Total sales revenue of both products - Green Health revenue

= $182,000 - $171,000

= $11,000

Hence, the incremental revenue is $11,000

Thus, the correct option is c. $11,000

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