Two Different Products Are Being Considered for Production

question 1

Essay

Two different products are being considered for production. The cost structures are listed below on a per unit basis. Which product should be produced, using revenue retrieval analysis?
$$\begin{array} { | l | l | l | l | l | } \hline \text { Product Blue } & \text { Resale Revenue } & \begin{array} { l } \text { Recycling } \\\text { Revenue }\end{array} & \text { Processing Cost } & \text { Disposal Cost } \\\hline \text { Part A } & \$ 5.25 & \$ 3.68 & \$ 1.01 & \$ 2.48 \\\hline \text { Part B } & \$ 8.78 & \$ 4.37 & \$ 1.04 & \$ 1.07 \\\hline \text { Part C } & \$ 2.13 & \$ 0.92 & \$ 0.14 & \$ 0 \\\hline\end{array}$$ $$\begin{array} {| l | l | l | l | l | } \hline \text { Product } & & \text { Recycling } & & \\\text { Yellow } & \text { Resale Revenue } & \text { Revenue } & \text { Processing Cost } & \text { Disposal Cost } \\\hline \text { Part A } & \$ 5.21 & \$ 3.54 & \$ 2.18 & \$ 0.88 \\\hline \text { Part B } & \$ 5.14 & \$ 5.66 & \$ 2.48 & \$ 1.97 \\\hline \text { Part C } & \$ 0.97 & \$ 0.71 & \$ 0.35 & \$ 0.31 \\\hline\end{array}$$

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Definitions:

Period Cost

Expenses that are not directly tied to the production process and are charged to the periods in which they are incurred, such as selling, general, and administrative expenses.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting the reduction of the asset's value due to usage and age.

Period Cost

Expenses incurred during a specific time period that are not directly tied to production activities.

Fixed Costs

Expenses that do not change with production volume, remaining constant regardless of business activity level.