A Company Has Already Incurred a $55,000 Cost in Partially

question 143

Multiple Choice

A company has already incurred a $55,000 cost in partially producing its three products.Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing.Based on this information,should any products be processed further? $$\begin{array} { c c c c } & \text { Unifinished } & \text { Finished } & \text { Further } \\\text { Product } & \text { Selling Price } & \text { Selling Price } & \text { Processing Costs } \\\text { A } & \$ 72 & \$ 108 & \$35 \\\text { B } & 83 & 124 & 42 \\\text { C } & 94 & 141 & 45\end{array}$$

• A)All of these products should be processed further.
• B)None of these products should be processed further.
• C)Products A and B should be processed further.
• D)Products B and C should be processed further.
• E)Products A and C should be processed further.

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Definitions:

Marginal Cost

The expenditure resulting from the creation of an additional unit of a product or service.

Short-run Total Cost

The total of all costs, both fixed and variable, that a firm incurs in producing goods or services in the short run.

Average Total Cost

The cost per unit of output, determined by dividing the overall production cost by the quantity produced.

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced.