A company manufactures three products, A, B, and C from a single raw material input. Product C can be sold at the split off point for total revenues of $53,000 or it can be processed further at a total cost of $15,000 and then sold for $71,000. Product C:_______. 1. should be sold at the split-off point, rather than processed further.
2. would increase the company's overall net operating income by $18,000 if processed further and then sold.
3. would increase the company's overall net operating income by $68,000 if processed further and then sold.
4. would increase the company's overall net operating income by $2,000 if processed further and then sold.

As the further process makes an increase in the revenue of the product the company should continue the processing to achieve an additional 3,000 revenue from product C regardless of the cost associate at splitoff point.

It will increase operating income by 3,000

Explanation:

With the given information we can derive the following using a differential analysis:

Differential revenue:

71,000 - 53,000 = 18,000

Differential cost: 15,000 (cost of further process)

Differential gain: 3,000