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Maxim has already spent $28,000 to manufacture a hamster food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand that can be sold for $90,000. Alternatively, Maxim can process it further into a different product, Premium Green, at an additional cost of $6,000. If Maxim processes further, the Premium Green can be sold for $98,000. The incremental income to process further is:

Sagot :

Tundexi

The incremental income to process further for Maxim company equals to $30,000.

What is an Incremental income?

This means the profit that a business gains from an increase in sales.

It is gotten when there is an additional revenue generated by a certain product.

The Net income to be generated from Green health equals:

= Revenue - Cost

= $90,000 - $28,000

= $62,000

The Net income to be generated from Premium Green equals:

= Revenue - Extra cost

= $98,000 - $6,000

=$92,000

What is Incremental income to Process further?

= $92,000 - $62,000

= $30,000

Read more about Incremental income

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