Pep Manufacturing produces Product K in batches of 4,000 gallons at $.60 per gallon. Product K can be sold without further processing for $0.80 per gallon. Product K can be processed further to yield Product G, which can be sold for $1.25 per gallon. Product G requires additional processing costs at $1,650 per batch.
Instructions
Compute the incremental income from further production of one batch of Product K.
Is the incremental income $950 since that's how much they would be the net income of selling product G or would it be $150 because that's how much the net income increases by producing product G?