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A 5,000 pound batch of coffee sells for $9.70 per pound and its materials cost $5.80 per pound. What is the income from selling it without further processing?
A$29,000
B$19,500
C$48,500
D$21,600
Answer & Solution
Correct answer: B. $19,500
1. Revenue is 5,000 pounds times $9.70, which is $48,500.
2. Materials cost is 5,000 pounds times $5.80, which is $29,000.
3. Income is $48,500 minus $29,000, which is $19,500.
4. No extra processing cost and no evaporation loss arise on this option.
5. $48,500 is revenue before the materials cost is charged.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 9.5 Sell a Product or Process Further_
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