Van Dusen Corporation Produces Several Products from Processing One Ton

Multiple Choice

Van Dusen Corporation produces several products from processing one ton of a mineral called Gummo. The material and processing costs for one ton of Gummo total $90,000, 10% of which is allocated to product Zeppo. One ton of Gummo yields 5,000 units of Zeppo which can be sold at this point for $15 per unit. Alternatively, Zeppo can be further processed into 5,000 units of a product called Chico at a total cost of $15,000 and then sold for $20 per unit. What is the financial advantage (or disadvantage) of further processing Zeppo into Chico?

A) A financial advantage of $1,000.
B) A financial advantage of $10,000.
C) A financial advantage of $25,000.
D) A financial disadvantage of $15,000.