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Graham Corporation has 1,000 cartons of oranges that were harvested at a cost of $26,500. The oranges can be sold as is for $30,000. The oranges can be processed further into orange juice at an additional cost of $12,500 and be sold at a price of $46,000. The incremental income (loss) from processing the oranges into orange juice would be:Multiple Choice$33,500.$3,500.$(16,000).$(3,500).$16,000.

Question

Graham Corporation has 1,000 cartons of oranges that were harvested at a cost of 26,500.Theorangescanbesoldasisfor26,500. The oranges can be sold as is for 30,000. The oranges can be processed further into orange juice at an additional cost of 12,500andbesoldatapriceof12,500 and be sold at a price of 46,000. The incremental income (loss) from processing the oranges into orange juice would be:Multiple Choice33,500.33,500.3,500.(16,000).(16,000).(3,500).$16,000.

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Solution

To calculate the incremental income or loss from processing the oranges into orange juice, we need to compare the potential income from selling the oranges as is versus the potential income from selling them as orange juice, taking into account the additional cost of processing.

  1. First, let's calculate the potential income from selling the oranges as is: $30,000.

  2. Next, let's calculate the potential income from selling the oranges as orange juice: $46,000.

  3. However, we need to subtract the additional cost of processing the oranges into orange juice: 46,00046,000 - 12,500 = $33,500.

  4. Now, let's calculate the incremental income or loss: 33,500(potentialincomefromorangejuice)33,500 (potential income from orange juice) - 30,000 (potential income from oranges as is) = $3,500.

So, the incremental income from processing the oranges into orange juice would be 3,500.Therefore,thecorrectansweris3,500. Therefore, the correct answer is 3,500.

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