Respuesta :
Answer:
The difference between the two operating income is $1,962
Explanation:
The operating income if cat bowls are sold at split-off point:
Revenue($11*1000) $11,000
Costs (50%*$20,000) ($10,000)
Operating income $1,000
The operating income if cat bowls are processed further is shown below:
Revenue ($14*1000) $14,000
Cost at split off (50%*$20,000) ($10,000)
Further processing cost ($4962)
Operating loss ($962)
The difference in operating income in the two instances can be computed thus:
Operating income when sold at split-off point less operating income when cat bowls are further processed
$1000-(-$962)
=$1000+$962
=$1,962
The difference in operating income between processing the cat bowls further versus selling them off at the split-off point is -$1,920.
Calculation of the difference in operating income:
Sales revenue after further processing (1000*14) 14000
Sales revenue at split-off point (1000*11) 11000
Incremental revenue 3000
Incremental Cost -4920
Incremental profit (loss) -1920
Difference in operating income (loss) = -1920
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